U.S. inflation hits 40-year high, crypto markets plunge over weekend, Bitcoin falls below $27,000, Ethereum falls below $1,500

Crypto markets have taken a huge hit since June 11. Cryptocurrencies saw a broader sell-off on Sunday after data showed that U.S. inflation hit a 40-year high. Bitcoin is now below $27,000, and Ethereum is down 12% to below $1,500, its lowest point since March 2021. Most major altcoins are also down today, with Dogecoin and Avalanche falling 9.4% and 13%, respectively.

Crypto market capitalization plunged to $1.10 trillion in the past 24 hours, down 8%. Experts believe the worst is yet to come as uncertainty grows for risk assets. Peter Schiff warned investors not to buy on the dip as "Bitcoin looks set to drop to $20,000 and Ethereum to $1,000."

Friday’s CPI data pushed price gains further above expectations, dispelling any expectations that cost increases may have peaked. Stocks plunged as the two-year Treasury yield rose to its highest level since 2008.

Inflation accelerated to its highest level in 40 years in May, suggesting price pressures are entrenched in the economy. The Federal Reserve is likely to extend its series of aggressive rate hikes.

The consumer price index rose 8.6% from a year earlier amid a broad expansion, according to data from the Labor Department released Friday. Typical inflation measures rose 1%, beating all forecasts. Housing, food and gasoline were the most important drivers of price increases. This suggests the Federal Reserve will have to put more pressure on the economy, raising the odds of a recession.

Bitcoin and other cryptocurrencies have come under pressure in recent months as the Federal Reserve has raised interest rates and world leaders have stepped up efforts to combat inflation. Technology stocks have also retreated amid market volatility.

Inflation data is fueling the bearish trend. The crypto market is likely to continue to show this negativity next week, especially with the FOMC meeting on Wednesday. Investors are concerned that rising prices will prompt the Fed to take greater action on cryptocurrencies when it holds its two-day policy meeting on Tuesday.

The current policy rate is between 0.75% and 1%. Risk assets, including cryptocurrencies, saw losses over the weekend. During this year's turbulent crypto markets, some crypto trading platforms such as Coinbase Global Inc. have frozen hiring or announced layoffs, with Gemini recently announcing that it would cut 10% of its staff.

According to some industry experts, crypto prices could fall further and significantly. Nevertheless, certain digital asset bulls believe that the current crisis could provide an opportunity. Some market participants noted that the sell-off could be a wake-up call for investors on the benefits of diversification. For others, however, it is a clear sign that a large number of asset classes will suffer major losses in the near future.

Most investors have lost confidence in the market, which means the decline could be much more severe. Analysts predict that if Bitcoin falls below the $20,000 high, it will quickly gap down to the 200-week moving average near $22,000 or even the 2017 high of $19,511.

According to data from Coinglass, the number of crypto liquidations hit an all-time high. According to the company’s records, the total long-term sales of cryptocurrencies on Sunday exceeded $100 million for the third consecutive day, following $258 million on Friday and $290 million on Saturday.

The MVIS CryptoCompare Digital Assets 100 Index, a market-cap-weighted indicator tracking the performance of the top 100 cryptocurrencies, fell to its lowest level since January 2021.

Ethereum has been falling since the beginning of the year, but this new low puts it about 70% below its all-time high in November. In the past 60 days alone, Ethereum has plunged more than 50%.

The crypto market cap has lost about $2 trillion since surpassing the $3 trillion milestone in November 2021. It remains to be seen whether the cryptocurrency market can survive many protracted bear markets. However, the situation does not look optimistic.