Cryptocurrency price drops again because of inflation fears

After a brief resurgence, prompting hope the crypto winter might finally be over, Bitcoin has lost momentum and shed almost 20 per cent of its value in seven days.

At 8:30 AEST, Bitcoin had softened to $21,000, down from last week’s rally price of $24,900.

Crypto analyst Simon Peters from eToro blamed “inflation fears” for causing new jitters to reverberate through the market and cause a “sharp sell off”.

Bitcoin prices have cooled following a recent surge in the past month. (CoinMarketCap)

Over the past days Bitcoin has been hit particularly hard by bad news on the inflation front, Peters said, with German figures higher than expected and US Federal Reserve minutes indicating its rate hikes are nowhere near finished.

Peters said crypto’s biggest coin also suffered a “double whammy effect” of liquidations on long positions on the futures market.

Despite hype from proponents, Bitcoin has turned out not to be an asset that performs well when inflation pressures are mounting and interest rates are spiking.

Bitcoin prices have plunged more than half this year, but there has been a solid rebound over the past month.

Prices stabilised around the $23,000 to $24,000, after plunging below $20,000 in June.

Person walks over Bitcoin sign — Bitcoin prices plunged below $20,000 in June. (Getty)

“While last week’s pullback will no doubt be of frustration to investors, there is plenty of activity happening in the cryptosphere,” Peters said.

A new report from Blockdata revealed Alphabet, Google’s parent company, invested more in crypto and blockchain companies than any other listed company between September 2021 and June this year.

The Silicon Valley tech giant reportedly spent $2.1 billion on four projects, as it looked to get ahead of competitors.

Alphabet beat the likes of BlackRock, Morgan Stanley and Samsung, which between them invested around $4.3 billion across projects, the report said.

Peters said the report showed, despite recent price volatility, crypto is here to stay.

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