Total crypto market capitalization tumbles by 12.6% to $1.04 trillion


According to recent data, the total crypto market capitalization has tumbled by 12.6 percent to $1.04 trillion.

Bitcoin, the largest part of the crypto market capitalization, saw a 9.2 percent drop to $21,271, its biggest intraday fall since mid-June this year.

Coin glass reported that $220 million of crypto assets were liquidated on Friday amid the drops. Half of those assets were Bitcoins.

Ether and several small tokens recorded steeper drops in the same period. Altcoins like Solana, Avalanche, and Cardano fell by more than 10 percent. On Friday, Solana saw its lowest point since mid-June, tumbling 14 percent.

Celsius (CEL) saw a 43.8 percent drop after the coin’s bankruptcy report on August 14 showed a balanced gap of $2.85 billion.

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Despite that, some tokens experienced value increases. EOS grew 34.4 percent after pledging to become a fully decentralized blockchain in September.

Chili (CHZ) also experienced a 2.6 percent increase after receiving a $100 million investment from Socios.com.

Analysts said the current bearish trend would not significantly impact short-term traders.

Cause of drop

This decrease came following a statement by the Federal Reserve saying that the government aimed to tighten the country’s monetary policy, which included interest rate hikes. In the past months, the Fed weighed whether to raise the interest rate by 50 or 75 basis points.

The statement caused investors to avoid riskier assets like crypto products, resulting in low demands for stablecoins and a lack of funding for crypto projects globally. Instead of these high-risk assets, investors would place their funds in bonds and the U.S. dollar, which showed growth on Monday.

Crypto Fear & Greed Index by Alternative.me was 27/100 on August 21, showing the sentiment of the crypto market turned bearish despite being neutral at the beginning of this month.

Investors are looking forward to the Fed’s annual symposium in Jackson Hole, Wyoming. Analysts have said that chairman Jerome Powell might opt for higher interest rate hikes as the loosened monetary policy in recent weeks has caused volatility in the financial markets.

Stricter monetary policy also increased the possibility of crypto market capitalization falling to $800 billion by the end of 2022, hitting a new annual low.

Drops in other markets

The traditional stock exchange also slumped on Monday. The S&P 500 dropped by 1.8 percent in the first two hours of the day. Tech-leaning Nasdaq Composite Index also lost 2.2 percent of its value.

The price of WTI oil fell by 3.6 percent or down by 22 percent from its $122 peak in June.

The euro also came to parity against the U.S. dollar, for the second time in the last twenty years. It previously fell to its lowest point in two decades in the middle of July.

“The end of summer sees the euro back under pressure, partly because the dollar is bid and partly because the Damoclean sword hanging over the European economy isn’t going away," Kit Juckes of Societe Generale said.

China’s Renminbi yuan also weakened against the U.S. dollar after the country’s central bank reduced the five-year loan prime rate from 4.45 percent to 4.30 percent on Sunday.