Bitcoin, Ethereum, XRP, Fall. Why This Crypto Slump Faces an Inflation Reckoning.

Bitcoin has a market value of more than $2 trillion. (Dreamstime)

Key Points

About This Summary

• Bitcoin decreased 0.8% over 24 hours to $111,722, accumulating a 4.6% loss over seven days and trading nearly 10% below its August peak.
• Other cryptocurrencies also experienced declines, with Ether falling 4.3%, XRP slipping 0.1%, and Solana down 2.7%.
• Investors are awaiting Friday’s personal consumption expenditure data, a key inflation measure, which could influence future interest-rate decisions.

Bitcoin and other cryptocurrencies slid early Thursday as investors turned their attention to coming economic data following a flash crash earlier this week.

Bitcoin was down 0.8% over the past 24 hours to $111.722, according to CoinDesk data, bringing losses over the past seven days to 4.6%. It’s now trading nearly 10% off its record high of just above $123,000 in August.

The second largest crypto by market value, Ether , fell 4.3%, while Ripple’s XRP slipped 0.1%. Solana was down 2.7%.

Traders are turning their attention to Friday’s personal consumption expenditure data (PCE), the Federal Reserve’s preferred inflation measure, which could influence the central bank’s next interest-rate decision.

When interest rates fall, safer investments such as bonds or certain equities offer lower yields, drawing investors to buy riskier assets such as cryptocurrencies.

Cryptos sold off across the board earlier this week in its biggest deleveraging event this year. On Monday, digital-asset investors unwound heaps of bullish bets made following the Fed’s quarter-point interest rate cut last week.

However, big liquidations reflect excess leverage, not failing fundamentals, said Maja Vujinovic, CEO of Digital Assets at FG Nexus. “Overheated funding post-Fed left traders exposed; once Bitcoin rolled over, forced unwinds hit ETH and [altcoins] hard.”

Though, as the crypto trade has remained cautious this week, Vujinovic argues history shows these “leverage washes” often mark a healthier base.

Write to Elsa Ohlen at elsa.ohlen@barrons.com