Cryptocurrencies extended losses early on Tuesday as markets inched closer to the release of the crucial inflation data from the U.S. for the month of March. Bitcoin dropped below the psychological $40k level while Ethereum breached the $3k level. Overall crypto market capitalization fell to $1.87 trillion, from $1.88 trillion early on Monday.
Consumer Price Inflation in the month of March is seen rising to 8.4 percent, from the level of 7.9 percent in February. The core CPI is expected to increase to 6.6 percent, from the level of 6.4 percent recorded in the previous month. The reading for the month of March is also expected to record a larger divergence between headline inflation and the core inflation, amidst a large volatility in the prices of fuel triggered by the uncertainty following the Russian invasion of Ukraine and the sanctions imposed in response.
Sentiment remains muted ahead of the ECB meeting scheduled for Thursday which meets in the backdrop of the German CPI increasing to 7.3 percent from 5.1 percent in the previous month.
The Dollar Index, which measures the strength of the U.S. Dollar against a basket of six currencies, continuing at a high of 100.16 also impacted sentiment in the crypto market. The Dollar Index touched a fresh 52-week high of 100.23 in the day’s trading.
Bitcoin is currently trading at $40,392.55, after ranging between $39,373.06 and $41,239.77 in the past 24 hours. Despite the fall, at the current price, 61 percent of the holders are still making profits.
BTC is down more than 10 percent on a year-to date basis.
Bitcoin, meanwhile slipped to the 10th position among all assets published by companiesmarketcap.com. The lead cryptocurrency has however retained the 15th rank among fiat/ digital currencies.
Ethereum touched a high of $3,062.54 and a low of $2,957.87. At the current price of $3,039.83, almost 73 percent of ETH holders are still in the money.
Ethereum has however fallen to the 27th rank among all assets as per companiesmarketcap.com.
Meanwhile the leading altcoin om Monday progressed on its transition to the PoS consensus with the successful launch of the first-ever mainnet Proof of stake (PoS) shadow fork.
Market capitalization of the Smart Contracts category which is led by 2nd ranked Ethereum, dropped to $543 billion and a dominance of 29.01 percent.
Stablecoins, with a market capitalization of $186.5 billion surged to 9.96 percent market dominance as investors preferred stablecoins to other heavily volatile cryptocurrencies.
4th ranked BNB, 6th ranked Solana (SOL) and 10th ranked Avalanche (AVAX) gained more than a percent.
8th ranked Cardano (ADA) and 11th ranked Dogecoin (DOGE) too have edged up.
7th ranked XRP (XRP), 9th ranked Terra (LUNA) and 13th ranked Polkadot (DOT) are all trading lower.
5th ranked meme-token SHINA INU (SHIB) and 17th ranked NEAR Protocol (NEAR) are trading more than 7 percent higher.
Every time the inflation gets hotter, the inflation-hedging narrative too gets intense. It also sets in motion a big debate on whether Bitcoin or any of the cryptocurrencies can act and succeed as an inflation hedge. The wider adoption of cryptocurrencies, especially at the institutional realm have undoubtedly added to the hedge appeal of cryptocurrencies.
As the transition to a tight monetary policy pushes interest rates higher and thereby the opportunity cost of holding non-yielding cryptocurrencies, the challenge to remain a successful inflation hedge increases more than proportionately. But if cryptos can demonstrate hedge effectiveness in this moment of reckoning, it is indeed poised to stand out in the financial landscape.
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