The Ethereum price just plummeted 17%. What’s going on?

Crypto investors will be closely watching what the US Federal Reserve does, and says, following Wednesday’s meeting.

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Key points

  • Ethereum price loses 17% in 24 hours
  • Crypto lender Celsius Network suspended withdrawals yesterday, stirring investor concerns
  • Higher than expected US inflation data could spell rapid interest rate rises, pressuring risk assets

The Ethereum (CRYPTO: ETH) price is nosediving.

The world’s number two crypto by market cap is currently trading for US$1,114 (AU$1,591). That’s down 17% from this time yesterday. That sees the token trading down 79% from its 16 November record highs.

And it’s not just the Ethereum price falling hard.

Most every top crypto is deep in the red, with Bitcoin (CRYPTO: BTC), the world’s original digital token, down 16%.

Celsius (CRYPTO: CEL), meanwhile, is down 28% over the past 24 hours and down 60% since Friday.

Why do we throw the spotlight on Celsius?

Crypto lender suspends trading

There are two major factors putting crypto markets broadly and the Ethereum price specifically under selling pressure today.

First, only a month after the multi-billion dollar losses caused by the meltdown of Terra’s USD stable coin and its supporting token Luna, another major player looks to potentially be in trouble.

Yesterday, global crypto-lender Celsius Network, which promises yields of up to 17% on some of its products, announced it was pausing all withdrawals and trading. Investors fear Celsius may not be able to meet its obligations.

Commenting on the impact of the Celsius announcement on cryptos, and by extent the Ethereum price, Vijay Ayyar, vice president of corporate development Luno said (quoted by Bloomberg):

The Celsius news added fuel to the fire, adding to the uncertainty in the market. There is a lot of pressure on prices as we go into the week of Fed decision coupled with concerns on the protocols offering high-yield products.

Ethereum price tumbles on interest rate fears

More broadly the Ethereum price is tumbling amid a wider sell-off of risk assets.

Yesterday in the United States (overnight Aussie time) the tech-heavy Nasdaq closed down 4.7%. Today in Australia the S&P/ASX All Technology Index (ASX: XTX) is down 6% in late afternoon trading. (The ASX was closed on Monday for the Queen’s Birthday holiday.)

The broad-based selling comes following an unexpected uptick in inflation numbers in the US on Friday.

As you know, inflation in the world’s largest economy has been running hot. Inflation reached 8.5% in March before edging lower to 8.3% in April. That had many analysts forecasting that the US may have seen peak inflation, with predictions of another drop in May.

That didn’t happen, with inflation last month coming in at 8.6%.

That’s seeing risk assets sell off and the Ethereum price crater as investors are now bracing for an even more aggressive tightening cycle by the US Federal Reserve to bring inflation back in line.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin and Ethereum. The Motley Fool Australia has positions in and has recommended Bitcoin and Ethereum. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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