On Wednesday, the leading cryptocurrency fell 2.7%, hitting lows not seen since early October of last year. The fact is that Iran has resumed attacks in the Strait of Hormuz. Now the market seriously doubts that shipping in this region will ever return to its previous levels.
Against this backdrop, Brent crude oil surpassed the $102-per-barrel mark. This is a bad sign for investors, as expensive fuel fuels inflation. And if inflation rises, regulators are forced to keep interest rates high for longer than the market would like.
Crypto exchanges have been thrown into chaos by a wave of liquidations. By midday, Ether had fallen 4.9%, XRP had lost 3.8%, and Solana had dropped 2.1%. Crypto stocks also buckled under the pressure: even before the market opened, Coinbase Global Inc. shares fell 2.3%, Robinhood Markets Inc. shares dropped 2%, and Block Inc. shares declined 0.7%.
Essentially, rising oil prices are exacerbating inflationary risks. This is forcing central banks to tighten monetary policy, which is having a negative impact on cryptocurrencies. This week, oil prices are rising due to fears of supply disruptions in the Middle East and bad weather in the Gulf of Mexico, which is hampering production in the U.S.
At the same time, yields on U.S. Treasury bonds have also crept higher. The yield on 10-year Treasury bonds exceeded 5.3%. And although it fell slightly this week, the figures are still close to their highs, which continues to put pressure on the crypto market.
After a strong third quarter, Bitcoin remained stuck in a narrow range in October, failing to reach its annual high of $126,000. Even hopes that the U.S. would introduce more lenient cryptocurrency regulations failed to lift prices. Investors are now more focused on the stock market and shares of companies related to artificial intelligence, leaving cryptocurrencies on the sidelines.