Bitcoin fell by 10% to below $25,000, marking its lowest rate since December 2020, and Ether slid by 13% to beneath the $1,270 level to its cheapest rate since January 2021.
Investors dropped the famous crypto assets like a hot potato as inflation fears set into the cryptocurrency hype, and sent multitudes of people fleeing from the plummeting coins as consumers worried about losses linked to their investments.
Crypto suffered additional pain as the US CPI index hit an eye-watering 40-year inflation record of 8.6% in May, leaving risky investments like Bitcoin and Ether in the dust.
“As inflation proves to be an even trickier opponent to beat than expected, Bitcoin and Ether are continuing to get a severe bruising in the ring,” said Hargreaves Lansdown senior investment and market analyst Susannah Streeter.
“They are prime victims of the flight away from risky assets as investors fret about spiralling consumer prices around the world.”
Meanwhile, the spectre of increased interest rates from the US Federal Reserve has set many sets of teeth on edge as investors rapidly back away from assets liable to punch a hole in their wallets.
“The worry is that inflation is becoming too hot to handle by central banks who will be forced to douse economies with jets of freezing water, in the form of much steeper interest rate rises, to get it under control,” said Streeter.
“With the era of cheap money coming rapidly to an end, traders are becoming much more risk averse and turning their backs on crypto assets.”
“Crypto fans have become used to volatile rides, but these rollercoaster descents are increasingly hard to stomach. Bitcoin has lost 61% while Ether has fallen by 72% since their respective November highs.”
The figures don’t bode well for the risk-averse, as reports from the UK’s Financial Conduct Authority (FCA) revealed that 14% of adults who invested in crypto over the Covid-19 pandemic fell into debt as a result.
“At a time when costs are escalating all over the place, nursing a big hole in a crypto wallet is the last blow they need,” said Streeter.
“It’s a stark reminder that dabbling in the crypto wild west is highly risky and investments in such assets should only be at the edges of a portfolio, with money you can afford to lose.’”