Pessimism has taken hold in the crypto market: investors are concerned about a possible increase in U.S. interest rates and uncertainty regarding government regulation.
Another cause for concern is the situation surrounding Strategy. Index provider MSCI announced that it is excluding the company’s securities from its key indices. This is usually a bad sign, suggesting that it will become more difficult for the company to raise capital.
As of 7:59 p.m. Moscow time, the price of Bitcoin had fallen by 2.7%, settling at $71,607. After a sharp decline in October and early November, crypto assets were already struggling to recover, and these new threats only complicate the situation.
Due to inflation in the U.S., many expect the Federal Reserve to raise interest rates as early as December. When interest rates rise, risky assets such as cryptocurrencies—which do not generate a fixed income—become less attractive to investors.
On the regulatory front, concerns have intensified following the Democrats’ victory in the U.S. midterm elections. Many now predict that Congress will begin to impose stricter oversight on the digital currency sector.
Strategy Inc. (NASDAQ:MSTR) Stock Plunge
Early Thursday, Strategy Inc. shares plummeted by more than 6%. This was due to an announcement by MSCI: the company was removed from global indices because it is now classified more as an investment fund.
Last year, the index provider conducted a major review of categories and proposed removing from its lists those organizations in which digital assets account for more than half of their total value.
Japan’s Metaplanet Inc. (TYO:3350), which ranks second in the world in terms of accumulated Bitcoin holdings, also fell under this rule.
Strategy’s management had previously warned that MSCI’s decision would trigger a $2.8 billion sell-off and deal a blow to the entire crypto industry.
To purchase bitcoins, the company primarily used proceeds from bond issuances and additional capital raises, which is always risky in the face of sharp market fluctuations. To pay off its debts, Strategy has already partially sold its bitcoins this year, and such actions only intensify the pressure on the price.
What’s happening with other cryptocurrencies: altcoins are following Bitcoin’s
lead On Thursday, the entire crypto market fell in the wake of its leader.
Ether, the second-largest cryptocurrency by market cap, fell 2.3% to $2,005.96, while XRP lost 2.9%.
Solana dropped 3.4%, while Cardano and BNB fell 4.3% and 4.1%, respectively.
Things aren’t going smoothly in the world of meme coins either: Dogecoin fell 4.5%, and the $TRUMP token dropped 6.2%.