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Bitcoin fell toward $19,000 during Asian afternoon hours after central bankers renewed inflation warnings at the European Central Bank’s annual forum on Wednesday.
The asset dropped 5.5% in the past 24 hours, and is on track for a record 40% monthly decline. Other large cryptocurrencies also weakened, with ether dropping 9.9% in the past 24 hours and Solana’s SOL falling as much as 11%. Total cryptocurrency market capitalization fell 4.3%.
Federal Reserve Chairman Jerome Powell reiterated the central bank's commitment to increasing interest rates to curtail inflation. Speaking at the ECB meeting, he said he was more concerned about the challenge posed by inflation than about the possibility of higher interest rates pushing the U.S. economy into a recession.
“Is there a risk we would go too far? Certainly, there’s a risk,” Powell said. “The bigger mistake to make – let’s put it that way – would be to fail to restore price stability.”
Powell said the Fed had to raise rates rapidly, Reuters reported, adding that a gradual increase could cause consumers to feel that higher prices of commodities would persist. About a week ago, his comments suggested rate hikes could soften before next year.
U.S. equity market futures fell following Powell’s comments, with S&P 500 futures dropping 1.59% and those on the tech-heavy Nasdaq 100 falling 1.9%. Asian markets were in the red with Japan’s Nikkei 225 declining 1.54% and the Asian-focused index Asia Dow falling 1.14%.
Central banks across the globe are weighing interest rate increases amid surging price pressures. Spain reported a 37-year record inflation of 10% earlier this week, while India and China are grappling with the risks of economic contraction.
Such concerns add to already critical selling pressure on bitcoin. The crypto has traded similarly to risky technology stocks in the past few months and has fallen 58% this year.
Contagion risks from within the crypto industry, such as the possible insolvency of crypto lenders and the blowup of prominent crypto fund Three Arrows Capital, have further caused downward pressure on the asset that was otherwise conceived as a potential hedge against inflation.