- Crypto prices, including Bitcoin and Solana, are down today after the Federal Reserve held interest rates steady at 5.5%
- The broader crypto market is down nearly 3.5% to $2.31 trillion, with Bitcoin below $30,000 and Solana experiencing the biggest drop of around 10% among top 30 cryptocurrencies
- While a rate cut is expected in September, the Fed’s decision was received negatively by crypto investors, as some interpreted it as a lack of commitment when inflation is cooling off
Crypto prices, including Bitcoin and Solana, are down today after the Fed held interest rates steady at 5.5% – but why is crypto down? Cryptocurrency prices often fluctuate, with dramatic rises and falls being common. Let’s examine the factors behind today’s crypto price drop.
The Extent of the Crypto Crash
Just like yesterday, crypto prices have dumped sharply. After a strong July which started weakly, prices rebounded to lift Bitcoin near $70,000. However, by July 31st, Bitcoin and most cryptocurrencies were down. The broader crypto market cap has dropped nearly 35% to $2.31 trillion. Bitcoin maintains the lead but losses mean it’s below $1.3 trillion at $1.2 trillion, commanding 55.1% market share. Falling Bitcoin prices have also negatively impacted top altcoins, especially Solana which flash crashed 10%, the biggest drop in the top 30. XRP and Ethereum shed around 5%.
The Role of the Federal Reserve
Crypto is falling primarily because the Federal Reserve held interest rates steady at 5.5% on July 31st. While Jerome Powell said a rate cut was possible in September, the decision was received negatively, especially by crypto investors. Some saw it as lacking commitment from the Fed while inflation is cooling. Earlier, Powell said cuts would be data-driven based on economic factors like inflation. A September rate cut is widely expected across traditional finance.
Outlook for Crypto Demand Drivers
Despite the Fed’s recent decision, the crypto community remains upbeat looking ahead. Upcoming rate cuts, improving regulation and political endorsement in the U.S. could propel valuations to record highs by year’s end. The approval of spot Bitcoin and Ethereum ETFs also now provides institutions legal exposure channels. When the Fed eased in 2020 and 2021, crypto prices rose sharply. The same could happen again if conditions align favorably.
Conclusion
In summary, the Fed’s unchanged interest rates are behind today’s crypto crash, but the demand outlook remains strong. As we’ve seen many times before, crypto prices can be volatile in the short-term. However, improving fundamentals suggest the long-term trajectory is still upwards.
