The Dow Jones index lost 1,000 points while the Nasdaq 100 index fell by 5% amid investor fear. The hardest hit by the market decline were technology stocks like Apple, Google, and Amazon.

The recent uncertainty in the markets amid inflation did not only affect the value of Bitcoin (BTC) and other cryptocurrencies. It also caused the stock market to suffer its worst drop since 2020. The decline in the Dow Jones, Nasdaq 100 and S&P 500 indexes reversed the progress achieved after the US Federal Reserve (Fed) announced interest rate hikes.

The fall in the leading stocks occurred amid investor fears about the medium and long-term economic outlook. While the Dow Jones index suffered a loss of 1,000 points, the cryptocurrency market also declined.

The drop in the Nasdaq 100 index has been the sharpest since the market crash. In March 2020, when the World Health Organization (WHO) declared the COVID-19 pandemic, the markets collapsed.

The hardest hit by the market decline in the past few days have been technology stocks. For example, Apple fell by 5.6%, Google dropped by 4.8%, and Amazon lost 7.6%.

Bloomberg reported that the US Fed’s plan to curb the increase in prices through the rising cost of money arouses doubts in the market. The analysts questioned the ability of the government agency to control the highest inflation in decades without leading the US economy into a recession.

The US Fed Plans More Interest Hikes for this Year

The chairman of the US Fed recently stated that there might be five more interest rate hikes, capped at 0.5%, this year. Jerome Powell denied that the remaining increases expected in 2022 could be 75 basis points (bps) or 0.75%.

Interest rate prediction tool CME (Chicago Mercantile Exchange ) FedWatch determines that the market seems to doubt those limits to the increases. It indicates that there is only a 17.1% probability that the rise will have a limit of 50 bps. Meanwhile, it gives an 82.9% probability of growth between 50 and 75 points in June.

The CME clarifies their calculations rely on the Fed funds futures contracts for the date of meeting at the Federal Open Markets Committee (FOMC).

The Bitcoin market is going through a trend of growing coupling with the behavior of traditional assets. That makes it more sensitive to external circumstances that affect the performance of said assets.

Bitcoin is trading at around USD 33,705 and has accumulated a 2.3% loss over the last 24 hours. It has a daily trading volume of above USD 29,81 billion, and its market capitalization is about USD 642.08 billion, according to CoinGecko.

Renowned on-chain analyst Willy Woo predicted that the price of BTC might continue dropping. However, he considers its recovery will occur quickly and sees a long-term bullish behavior.

Woo suggests that a structural supply shock is underway, with significant purchases of Bitcoin not reflected in the price. He pointed out that this usually leads to a high bullish price contraction, not without warning that this may take time to happen.

By Alexander Salazar


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