Cryptocurrency prices are sliding lower as worries about stagflation grip equity markets.
The price of Bitcoin (BTC) is down 2% over the last 24 hours and trading at $$62,400 U.S., while the price of Ethereum (ETH) has fallen 5% to trade at $3,160 U.S.
Smaller digital coins and tokens are also seeing their prices decline. Cryptocurrencies trade around the clock, 24 hours a day, seven days a week.
The current decline comes amid renewed fears of stagflation in America, which is widely viewed as a worst-case scenario for risk assets such as stocks and crypto.
Stagflation occurs when inflation continue to rise even though the economy is slowing.
In recent days, economic data showed that U.S. gross domestic product (GDP) grew at an annualized rate of 1.6% in the year’s first quarter following the preceding quarter's 3.4% growth.
At the same time, the personal consumption expenditures (PCE) price index, the U.S. Federal Reserve’s preferred inflation gauge, rose to a greater-than-expected 3.4% annualized rate in Q1, up from 1.8% in the fourth quarter of 2023.
The data essentially shows that the U.S. economy is slowing down even as inflation continues to rise, the textbook definition of stagflation.
The current situation has lessened the chances that the U.S. central bank will lower interest rates this year as the stock market had anticipated.
Futures traders have revised their forecasts and are now predicting no rate cuts in 2024 as the most likely scenario.
Only 35% of futures traders now expect at least one rate cut in America this year.
Beyond the dashed expectations for rate cuts, crypto prices are also slumping on media reports that mainland Chinese investors won't be able to trade the new crop of crypto exchange-traded funds (ETFs) that have been approved for the Hong Kong stock exchange.
The price of Bitcoin, the biggest cryptocurrency by market capitalization, is up 42% year to date.
