Key facts
- Bitcoin fell to a two-week low of $62,000, down 4% in 24 hours.
- Tech stocks, including the Nasdaq, experienced a sell-off.
- Investors are reacting to expectations of Federal Reserve interest rate hikes.
- Ethereum, XRP, and Solana saw losses exceeding 5%.
- SpaceX shares declined 12% after a strong debut.
- Potential market catalysts include Middle East de-escalation and the Clarity Act.
Bitcoin and other cryptocurrencies experienced a significant downturn on Tuesday, falling to two-week lows as investors shifted away from risk assets. Bitcoin tested $62,000, marking a 4% decrease over 24 hours, while Ethereum, XRP, and Solana saw losses of at least 5%. This decline mirrored weakness in the tech-heavy Nasdaq, which was projected to slide 1.6%, with chipmakers like Micron Technology and SanDisk among the drag. Asian tech stocks also showed declines earlier in the session.
The sell-off in AI-related stocks, including a 12% drop in SpaceX shares, contributed to a broader risk-off sentiment, according to crypto trading firm GSR. Investors are reportedly digesting expectations of further interest rate hikes by the U.S. Federal Reserve. Following remarks from Federal Reserve chair Kevin Warsh, traders are anticipating a rate increase to a target range of 3.75% to 4% in July. Bank of America economists have projected three hikes this year, potentially raising rates to 4.25%-4.5% by year-end, which typically weighs on risk assets.
Despite the current tepid market, some analysts see potential catalysts for a rebound. Gerry O'Shea of Hashdex pointed to potential de-escalation in the Middle East, particularly following a memorandum of understanding between the U.S. and Iran, and the passage of the Clarity Act as factors that could invigorate the crypto market. However, the Clarity Act faces a critical August deadline before lawmakers become consumed by midterm elections.