The cryptocurrency market is undergoing a significant price decline following mid-August peaks. Bitcoin and Ethereum are losing value due to rising inflation and other macroeconomic factors.
Overview of the Current Cryptocurrency Market
Bitcoin price fell from about $124,000 on August 14 to around $108,500 this week. Ethereum eased from about $5,000 to $4,393. This decline followed a negative sentiment for risk assets.
Impact of Inflation and Tariffs on Prices
U.S. inflation metrics have spiked. The Producer Price Index (PPI) jumped 0.9% month-on-month, marking the largest gain since June 2022. Service-sector prices also contributed to the rise. As one economist put it, the PPI report was 'a kick in the teeth' to anyone who thought tariffs wouldn’t hit domestic prices.
Investor Reaction and Fund Outflows
Cryptocurrency markets are seeing negative fund flows. On Friday, spot Bitcoin and Ether ETFs experienced significant withdrawals after the release of hotter core inflation data. Ethereum ETFs had around $164.6 million in net outflows, while Bitcoin ETFs lost $126.6 million. These were the first daily outflows for BTC funds since August 22.
The decline in Bitcoin and Ethereum prices is driven by rising inflation metrics and shifts in investor sentiment. Given the current macroeconomic conditions, further price fluctuations in cryptocurrencies seem likely.
