The crypto industry lost $400 million to liquidation in two days following an important policy meeting, the Federal Open Market Committee (FOMC) held yesterday, which sparked frantic sell-offs.
The Federal Open Market Committee is an offshoot of the Federal Reserve and they decided in the meeting to keep interest rates steady.
The meeting outcome had a solidifying effect on the crypto industry triggering liquidations and affecting prices of major crypto assets. The price of bitcoin dropped from $70,000 to $66,000 and other altcoins also witnessed a sharp drop in price as a result of the meeting.
The FOMC in their fourth policy meeting of the year refused to cut rates sparking volatility in the crypto markets which resulted in a $400 million liquidation.
The Federal Reserve Chair Jerome Powell explained the motive behind the decision of the FOMC meeting stating that the committee is committed to maintaining its tight monetary policy which has proven to be a success.
FOMC decision crashes crypto prices
The decision by the FOMC resulted in various crypto assets crashing in price value. Bitcoin the largest crypto asset by price and market cap crashed from an impressive $70,000 to $66,000. Ethereum the second-largest crypto asset and the biggest altcoin crashed from $3700 to $3400.
Other crypto assets like Cardano, Solana, and Ripple also felt the pinch of the FOMC’s decision and fell in price value. The three crypto-assets all experienced an 8% reduction in price.
The $400 million loss to liquidations reflects the surge of volatility and waning investor confidence gaining ground in the crypto markets today.
CPI results spark optimism
It was not all bad news for the crypto market following the decision of the FOMC meeting. The release of the United States Consumer Price Index results sparked some optimism because the numbers were a little bit better than expected. The report showed a year-over-year inflation rate of 3.3% for May, slightly cooler than the anticipated 3.4%.
The United States has adopted a strict economic policy when it comes to the issue of rate cuts. This is a diversion from other Western economies like the European Union and Canada which have decided to implement rate cuts to combat their countries’ inflation.
A survey carried out by Grayscale reveals that 41% of voters are turning their attention towards Bitcoin in search of alternatives to deal with the country’s persistent inflation.
Donald Trump the leading opposition figure in the upcoming US presidential elections has embraced the Crypto industry fully pledging to deepen the adoption of cryptocurrencies in the country if elected.
What to know
- A federal rate cut is an action by a government financial authority with the objective of stabilizing prices, controlling inflation, and stimulating economic growth. This works because lowering finance costs can spur businesses and consumers to invest as well as borrow.
- The traditional financial market was also affected by the decision of the FOMC not to cut interest rates.