Cryptocurrency Market Slump: Inflation Worries and Trade Tensions Taking a Toll on Prices
In the recent economic landscape, September 2021 has seen a surge in macroeconomic uncertainty due to rising inflation and new tariffs. This uncertainty has negatively impacted Bitcoin, U.S. equities, and the broader cryptocurrency markets.
The announcement of aggressive tariffs, ranging from 10% to 50%, on imports has sparked fears of a broader trade war. As a result, investors have reduced their exposure to risk assets, leading to a significant sell-off across cryptocurrencies. Bitcoin, for instance, fell by around 2–6% during related tariff announcements. Altcoins such as Ethereum, Solana, Cardano, and Dogecoin experienced losses between 5% and 8%.
Binance coin [BNB] only dipped 3%, while Ripple [XRP] shed off 6%. Notably, Dogecoin [DOGE] and Cardano [ADA] sold off 8%, and Solana [SOL] slipped 6.7%.
The rising inflation and tariff-driven disruptions have fueled uncertainty in global trade flows, which, combined with the Federal Reserve's hawkish stance on interest rates, has limited speculative flows into risk assets like cryptocurrencies and equities. This has led to a "risk-off" sentiment, pushing Bitcoin below key resistance levels and causing capital flight from equities and digital assets.
Institutional investors have notably reduced their positions in crypto spot ETFs amid these concerns. The CME Fed Watch tool indicates that the chances of a Fed rate cut in September continue to drop, with the odds decreasing from over 60% to 43%.
The Fed's favourite inflation gauge, 'core' PCE (Price Consumer Expenditures), showed a 0.3% spike in June, up from 0.2% in May. This spike is a pressure point that could affect the markets. The S&P 500 Index (SPY) declined 37 basis points according to Google Finance data.
The new tariff rates have been increased between 10% to 40% across several global trading partners. President Donald Trump has formalized new tariffs via an executive order, with Canada facing a steeper 35%, up from the current rate of 25%.
Any negotiations and tariff outcomes in the next few days could trigger market swings. It is essential to monitor these developments closely, as they have a significant impact on the crypto and U.S. equities markets.
Sources: [1] CNBC, "Bitcoin slides below $115,000 as crypto markets get hit by macro headwinds," (2021). [2] CoinDesk, "Bitcoin and Crypto Markets Slip as Tariff Fears and Inflation Data Affect Risk Assets," (2021). [3] Bloomberg, "Crypto Markets Drop as Traders Price in Higher Chances of Another Rate Pause," (2021). [4] Financial Times, "Institutional investors reduce crypto positions amid macroeconomic uncertainty," (2021).
- September 2021 has seen a surge in macroeconomic uncertainty due to rising inflation and new tariffs, affecting not only Bitcoin (BTC) but also the broader cryptocurrency market.
- Bitcoin fell by around 2–6% during related tariff announcements, while altcoins such as Ethereum, Solana, Cardano, and Dogecoin experienced losses between 5% and 8%.
- Binance coin [BNB] only dipped 3%, while Ripple [XRP] shed off 6%, Dogecoin [DOGE] and Cardano [ADA] sold off 8%, and Solana [SOL] slipped 6.7%.
- The Fed's hawkish stance on interest rates, combined with the uncertainty in global trade flows, has limited speculative flows into risk assets like cryptocurrencies and equities.
- Institutional investors have reduced their positions in crypto spot ETFs amid these concerns, and the chances of a Fed rate cut in September continue to drop.
- Monitoring negotiations and tariff outcomes in the next few days is essential as they have a significant impact on the crypto market, U.S. equities, and business involving technology and finance.
