What just happened? Bitcoin is crashing once again. The world's most popular cryptocurrency fell as low as $18,620 earlier today, marking its second-lowest price this year; the coin was briefly at $17,600 in June. BTC wasn't the only digital asset to suffer as coins including Ether also saw their prices drop, causing the global cryptocurrency market to fall below the $1 trillion mark.
Bitcoin is down more than 6% so far this week. Ethereum, the second-largest crypto by market cap, dropped from $1,678 on Tuesday to $1,493 a few hours ago. It seems the crypto winter that followed the collapse of TerraUSD in May is showing no signs of ending.
The crypto market fell below $1 trillion following the TerraUSD incident. A slight resurgence followed, but it's back below the milestone. It's a far cry from November 2021, when Bitcoin hit its peak price of $69,000 and the global cryptocurrency market peaked at $2.9 trillion.
While there are several factors behind crypto's struggle, surging interest rates are having the biggest effect. The US Federal Reserve has repeatedly hiked interest rates by a total of 2.25%, pushing inflation to its highest level in more than 40 years. Chairman Jerome Powell warned that the central bank would continue raising them, causing "some pain" to the US economy.
CNBC writes that policy tightening by the Fed has strengthened the dollar, which has weighed on risk assets. The 10-year US Treasury yield has also surged.
There is some hope for crypto owners: the Merge, Ethereum's long-planned and often delayed move from the current proof-of-work model to proof-of-stake. The Ethereum Foundation says it will happen sometime during the middle of this month. Not only could it push graphics card prices down even further, but it might also attract more ETH buyers and give the overall digital asset market a boost.
The crypto winter has devasted holders and businesses. The largest Bitcoin mining companies lost over $1 billion last quarter, forcing them to sell mining rigs to stay afloat; Celsius went bankrupt; and OpenSea, the world's biggest NFT marketplace, cut 20% of its jobs.