Investing.com– The cryptocurrency market experienced a sharp decline this week, with Bitcoin trading near its lowest level in two months. The drop came as investors were unnerved by UK inflation data and fresh warnings from US Treasury Secretary Janet Yellen regarding the ongoing stalemate over the US debt ceiling.
Despite the release of Federal Open Market Committee (FOMC) minutes, which revealed divisions among U.S. central bankers on the continuation of interest rate hikes, market confidence remained low. Bitcoin’s value dipped to as low as $25,885 – its weakest since mid-March – before settling at $26,278 at 01:56 ET (05:56 GMT).
Over the past week, BTC has been struggling with low trading volume and volatility, as markets grapple with the possibility of a US government unable to pay its debts. This is coupled with persisting uncertainties surrounding cryptocurrency regulation and broader macroeconomic factors. Until Wednesday, Bitcoin had managed to stay within a tight range of $26,500 to $27,500.
The surge in the U.S. dollar amid debt ceiling jitters has further dampened investors’ appetite for cryptocurrencies. A strong dollar often results in decreased demand for digital assets, as they become relatively more expensive for holders of other currencies. This is particularly true for Bitcoin, which often acts as a proxy for the wider crypto market.
Other major cryptocurrencies also experienced significant losses in response to these developments. Ethereum (ETH), the second-largest digital currency by market capitalization, saw a decline of around 2% on Tuesday. Binance Coin (BNB), Cardano (ADA), and XRP followed suit with similar drops in value.
The ongoing debt ceiling standoff in the US has raised concerns over the potential for an unprecedented government default, which could have far-reaching implications for global financial markets. As a result, investors are increasingly seeking refuge in safe-haven assets, chiefly the U.S, dollar. This flight to safety has left riskier assets like cryptocurrencies in a vulnerable position.
Source: Investing.com