Cryptocurrencies experienced a sharp decline on Wednesday as rising geopolitical tensions drew investors’ focus following the July Federal Reserve meeting.
Bitcoin (BTC) fell to $64,500 from around $66,500, marking a drop of more than 2% over the past 24 hours. Major altcoins such as ether (ETH), solana (SOL), Avalanche’s AVAX (AVAX), and Cardano (ADA) also saw declines, though Ripple‘s XRP managed to retain some gains from earlier in the day. The overall crypto market, represented by the CoinDesk 20 Index, was down 0.8% compared to 24 hours ago.
The sell-off was triggered by a New York Times report indicating that Iran’s leaders ordered retaliation against Israel for the killing of Hamas leader Ismail Haniyeh in Tehran, heightening the risk of a broader conflict in the region.
Earlier in the day, the Federal Reserve left benchmark interest rates unchanged and did not confirm the widely expected rate cut in September. Fed Chair Jerome Powell mentioned that while no decisions have been made regarding a September cut, the general consensus is that they are moving closer to reducing rates.
Despite the losses in digital assets, most traditional asset classes saw gains. The 10-year U.S. bond yields dropped by 10 basis points, gold increased by 1.5% to $2,450, nearing its record highs, and WTI crude oil prices surged by 5%. Equities also rose, with the tech-heavy Nasdaq 100 index rebounding by 3% and the S&P 500 closing 2.2% higher, led by a 12% gain in chipmaker giant Nvidia (NVDA).
The contrasting performances between asset classes may be attributed to traders’ positions before the Fed meeting, according to Zach Pandl, head of research at Grayscale.
“Equities may have been slightly under-owned after the recent drawdown, while bitcoin is coming off a strong period with solid inflows, whereas gold rallied after a period of weakness,” he noted.
“In the bigger picture, the combination of Fed rate cuts, bipartisan focus on crypto policy issues, and the prospect of a second Trump Administration could result in a weaker U.S. dollar, which would be very positive for bitcoin,” he concluded.
Related Topics:
