Bitcoin began Wednesday morning with a sharp drop, by the time of writing, its value was balanced at $18,907.

According to virtual asset price tracking website CoinMarketCap, over the past 24 hours, the lowest value of bitcoin reached $18,644, the lowest value in 2022, and the highest was $20,003.

Over the past Tuesday, the price of the cryptocurrency collapsed by 4% and closed the trading session at a level below $19,000.

At the same time, a sharp decline in BTC began after the coin broke through the key support of the last ten days at around $19,600.

Reasons for the fall of BTC

Crypto experts identify several key factors among the many ones in the decline of bitcoin. One of them is the US Federal Reserve's protracted struggle with record inflation. The US central bank has regularly raised interest rates and reduced its balance sheet by $95 billion every month since September of this year.

By the way, in their recent report, experts from the analytical company Kaiko spoke about the high correlation between the cost of bitcoin and the Fed's decisions, which was recorded back in the summer of 2021.

So, when in March 2022, for the first time since 2018, the Fed increased the base rate by 50 percentage points, to 0.25-0.50%, the cryptocurrency market reacted to the decision with growth.

In May of this year, after the Fed increased the rate range to 0.75-1.00% per annum, the cost of the first cryptocurrency sharply overcame the level of $40,000, but on the same day it fell below $36,000, starting the process of a protracted correction.

In June, when the US central bank raised the key rate by 75 basis points at once for the first time since 1994, the BTC immediately reacted with a spectacular increase to $22,000, and then a collapse to $18,000.

Experts are confident that in the coming months, the digital asset market will respond even more strongly to the speeches of world central banks, because often, an increase in the interest rate dramatically reduces the ability of investors to invest in risky assets such as virtual currency.

In addition, today the cryptocurrency market is restless in anticipation of the upcoming migration of Ethereum from energy-intensive PoW to a more environmentally friendly Proof-of-Stake algorithm. The long-awaited event is scheduled for the period from 10 to 20 September.

Ethereum co-founder Vitalik Buterin claims that the transition of the network to Proof-of-Stake will increase the popularity of digital assets for everyday payments by reducing the fee to 2 cents. According to the Canadian-Russian programmer, the popularity of crypto payments has fallen after 2018 amid high transaction fees.

At the same time, many members of the crypto community fear that the technical problems associated with the migration of Ethereum to PoS could provoke a loud drop in the second largest virtual asset by capitalization. In turn, the collapse of ETH can put serious pressure on the global cryptocurrency market.

And finally, bitcoin turned out to be one of the most affected virtual currencies amid a permanent fall in the US stock market.

Thus, since the beginning of 2022, analysts have increasingly begun to emphasize the high level of correlation between the US securities market and virtual assets amid intense anticipation by both of the consequences of the geopolitical conflict in Eastern Europe and further steps by the Fed.

Earlier, experts from the investment company Arcane Research have already stated that the correlation of BTC and technology securities has reached its high since July 2020.

Such close parallels of bitcoin with US stocks, in particular with the NASDAQ index, make investors increasingly doubt the ability of cryptocurrency to become a hedge against inflation.

Altcoin market

Ethereum, the main competitor of bitcoin, also began the trading session on Wednesday with a steady fall and by the time of writing the material had reached $1,508. Over the past day, the quotes of the altcoin have decreased by 5%.

As for cryptocurrencies from the top 10 by capitalization, over the past 24 hours, all coins, with the exception of a few stablecoins, showed a negative trend. At the same time, the lowest results per day were noted in Polkadot (-8.9%).

As part of the past week, among the ten strongest cryptocurrencies, the best results were recorded for the Cardano coin (+1.6%), and the worst for BNB (-6.6%).

According to CoinGecko, the world's largest virtual asset data aggregator, over the past 24 hours, among the top 100 most capitalized digital assets, Evmos coin (+0.8%) topped the list of leaders, and DeFiChain (-24.0%) took the first place in the decline list.

According to the results of the past week, in the top hundred of the strongest digital assets, the best results were shown by the Terra Luna Classic coin (+126.7%), and the worst by Helium (-30.1%).

According to CoinGecko, over the past 24 hours, the total market capitalization of cryptocurrencies has dipped by 6% to $940.248 billion.

Since last November, when this figure exceeded the $3 trillion mark, it has more than tripled.

At the same time, the MVIS CryptoCompare Digital Assets indicator, which shows the performance of hundreds of key cryptocurrencies, has fallen by about 60% in 2022.