Bitcoin (BTC) and the wider financial markets faced a new wave of selling on June 18 following comments from James Bullard, the president of the United States Federal Reserve Bank of St. Louis, indicating that he expects the first interest rate increase to happen in late 2022.
Bullard’s comments were even more hawkish than Wednesday’s comments from Fed Chair Jerome Powell, who indicated that the rate hikes would come in 2023. Powell’s comments triggered a sell-off across financial markets as the U.S. dollar gained strength.
U.S. dollar currency index. 4-hour chart. Source: TradingView
Data from Cointelegraph Markets Pro and TradingView shows that as the dollar was strengthening, Bitcoin bulls were overwhelmed by sellers, triggering a decline to a daily low at $35,129.
BTC/USDT 4-hour chart. Source: TradingView
The uniform sell-off across a variety of assets including stocks, gold and cryptocurrencies has further eaten away at the narrative that Bitcoin is an uncorrelated asset, as data shows that BTC’s correlation with both gold and stocks has continued to increase throughout 2021.
Traditional markets close the week down
Friday’s close in traditional markets marked one of the worst weeks for the Dow since October after the index saw five straight sessions of losses for a total decline of 3% this week.
The S&P 500 and NASDAQ were also hard hit on Friday, closing the day down 1.31% and 0.92% respectively, while the 10-year treasury note fell by 4.04% in response to the strengthening dollar.
As for the cause behind the recent hawkish stance from the Fed, Bullard pointed to a higher than expected level of inflation as the economy reopens following the Covid-19 lockdowns.
“We’re expecting a good year, a good reopening. But this is a bigger year than we were expecting, more inflation than we were expecting. I think it’s natural that we’ve tilted a little bit more hawkish here to contain inflationary pressures.”
Bullard suggested that in the future, inflation is “running at 3% this year and 2.5% in 2022 before drifting back down to the Fed’s 2% target.”
Altcoins price crumble
Altcoins saw their prices decline alongside Bitcoin on Friday as traders once again fled to the safety of stablecoins as market volatility picked up.
Daily cryptocurrency market performance. Source: Coin360
Ether (ETH) saw its price slide more than 13% to reach a low at $2,137 and Amp (AMP) fell 33% from its all-time high of $0.1211 that was established on June 16.
Related: Bulls hesitate to buy the dip after Bitcoin price falls close to $35K
Of the top 200 coins, the two best performances of the day were ZKSwap (ZKS) with a 14% gain Gnosis (GNO) which rallied by 7.4%.
The overall cryptocurrency market cap now stands at $1.486 trillion and Bitcoin’s dominance rate is 44.8%.
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