Cryptocurrency prices resumed their downward trend on Tuesday as market participants awaited the second Federal Reserve interest rate decision of the year.
Pi Network (PI), the viral tap-to-earn token, was one of the worst performers, dropping by almost 13%. JasmyCoin (JASMY) dropped by 6%, while Litecoin (LTC) and Ethena (ENA) fell by over 5%.
The total market cap of all cryptocurrencies fell 1.70% to $2.7 trillion, wiping out more than $1 trillion in value over the past few months. Total liquidations in the last 24 hours climbed to over $227 million.
The crypto sell-off coincided with a stock market downturn. The Dow Jones index dropped 410 points, while the tech-heavy Nasdaq 100 fell 350 points. Top blue-chip stocks like NVIDIA, Tesla, Microsoft, and Apple each dropped by over 1%.
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Jasmy, Pi Network, LTC, and Ethena slip ahead of FOMC decision
The ongoing crypto and stock market crash is because the market is adjusting to the upcoming Federal Reserve or FOMC interest rate decision. It has already started its two-day meeting, with the final decision expected on Wednesday.
The Fed is expected to leave interest rates unchanged at 4.50%. However, traders will closely watch the quarterly dot plot, which provides clues about the timing of the next rate cut.
Stocks and crypto investors hope that the recent sell-off and the rising fear of a recession will prompt some Fed official to turn dovish. A Fed put would be a catalyst for Bitcoin (BTC) and altcoins like Pi Network, Ethena, Jasmy, and Litecoin. In a note to Bloomberg, an analyst said:
“The ongoing trade tensions and tariff implementations have introduced significant uncertainty. Investors are eager to understand how these policies are influencing the Feds economic outlook, especially concerning inflation and growth projections.”
Bitcoin and these altcoins also declined after Ki Young Ju, a popular analyst and the founder of CryptoQuant warned that the bull market was over. He said:
“I‘ve been calling for a bull market over the past two years, even when indicators were borderline. Sorry to change my view, but it now looks pretty clear that we’re entering a bear market.”
On the positive side, a more dovish Fed stance could boost Bitcoin and altcoins — similar to the market reaction during the onset of the COVID-19 pandemic. At that time, cryptocurrencies initially crashed but rebounded strongly after the Fed slashed interest rates.