The United States’ financial markets stabilized on Monday after suffering their worst crash since 2020 last week.
The markets pulled themselves back up amidst global turmoil surrounding the potential invasion of Ukraine and the introduction of a stricter Federal Reserve policy.
The S&P 500 finished the day 0.3 percent higher after correcting from a 4 percent crash. The NASDAQ and the Dow Jones Industrial Average rose as well, the former by 0.6 percent after correcting from a 5 percent crash, the latter 0.3 percent after barrelling down 2.9 percent.
The markets’ week-long descent was in anticipation of the Fed’s Tuesday meeting at which policymakers are expected to increase the lending rate in March.
“The markets remain on edge regarding the ultimate economic impact of elevated expectations that the Fed may have to aggressively tighten monetary policy to combat persisting inflation pressures,” investment bank Charles Schwab said in a statement.
Inflation rose 7% over the course of 2021 in the United States, the largest increase since 1982. The United States Labor Department released a survey of the country’s consumer price index on Wednesday, finding that the cost of goods has increased by 7%, with a monthly increase of roughly 0.5%.
Bitcoin plunges as Ukraine unease now coupled with inflation woes
Coin Metrics had Bitcoin down approximately 4%,at $33,755.57 on Monday; its cryptocurrency rival Ether plunged an even greater 7%, down to $2,239.08. Earlier on Monday, they had fallen to their lowest points since July of last year, representing approximately half of what they were worth at their all-time highs. Both cryptocurrencies have since corrected, with Bitcoin at $36,054.20 and Ether at $2,390.60 as of Tuesday morning.
Juthica Chou, the head of OTC options trading at Kraken, stated to CNBC “It’s possible that macroeconomic concerns, such as the Fed’s response to inflation rates, have facilitated more de-risking activity in general.
“The recent price drop, coupled with high volatility, could be leading to further selling as participants look to reduce risk.”
Looming issues regarding the possible regulation of the notoriously unregulated currency are also plaguing Bitcoin and other digital currencies. Last week, Russia’s central bank proposed a total ban on using and mining cryptocurrencies, according to CNBC.
Vijay Ayyar, Luno’s vice president of corporate development and international expansion says that Bitcoin may end up going a bit lower. He thinks that if the coin stays above $30,000 for as long as one week, that might form a base before the market eventually goes higher. But he doubts that it will become bullish given current circumstances.
Analyst John Roque of 22V Research told CNBC that bitcoin could plunge even below the $30,000 threshold, saying that he too has been using that as a target but admits that the median historical bear market for the cryptocurrency is down 78%.