High interest rates in the US make Bitcoin's recovery momentum unlikely to last. Along with that are concerns that the industry will be subject to more scrutiny.

High interest rates in the US make Bitcoin's recovery momentum unlikely to last. Along with that are concerns that the industry will be subject to more scrutiny.

According to CoinMarketCap data, Bitcoin was trading around the threshold of $21,500/dong on July 28 (USA time). On July 26, the coin fell to a one-week low.

Hold your breath waiting for the decision of the Fed

Bitcoin price has returned to the region of 19,000-22,000 USD/dong and erased all hope of a sustainable recovery of the currency. Investors' risk appetite changed as the market held their breath waiting for the decision of the US Federal Reserve (FED) in the July meeting. The US central bank is likely to raise interest rates by 0.75 percentage points. hundred, similar to the increase in June.

“The crypto market has stabilized over the past few weeks. That has led many Bitcoin advocates to believe that the coin has bottomed out and will recover in the near term,” said Katie Stockton, co-founder of Fairlead Strategies. told Bloomberg.

"But we are not convinced by this argument," she added.

The price of Bitcoin and other cryptocurrencies plummeted after the Fed raised interest rates sharply. Along with that is the collapse of famous names in the industry such as hedge fund Three Arrows Capital. Since the beginning of the year, the Bitcoin price has dropped 55%.

With that, the USD has strengthened against every other major currency this year. This is also a drag on the cryptocurrency market.

"Increasing geopolitical tensions could support the USD. This will reduce investor risk appetite and adversely affect the crypto market," said Edward Moya, market analyst. senior at consulting firm Oanda - told Bloomberg.

"Macroeconomic factors make it difficult for investors to put money down. The market is still in a weakening phase," commented Mr. Patrick Chu at OTC trading platform Paradigm.

Tighten regulations?

Worth mentioning, the collapse of crypto companies exposed flaws in the industry's high-risk business model. Companies often use high leverage, promise customers heavenly profits and pour money into equally risky bets. Thus, the wound spreads after the market weakens, hedge funds and lending companies collapse.

For example, cryptocurrency exchange Voyager Digital filed for bankruptcy protection after crypto hedge fund Three Arrows Capital (3AC) defaulted on a loan worth more than $660 million. Cryptocurrency lenders Genesis and BlockFi (US), crypto derivatives platform BitMEX and exchange FTX also lost money because of 3AC.

Meanwhile, cryptocurrency startup Blockchain.com has loaned 3AC $ 270 million in cryptocurrency and is forecast to lose everything. The company also had to lay off a series of employees and halt expansion plans.

They always have to make a profit. Therefore, they pour money into assets that promise high returns and do not hedge," commented Nik Bhatia, founder of The Bitcoin Layer.

Bloomberg suggested that the chaos in the crypto industry could create a wave of regulation targeting the sector. For example, Coinbase Global Inc. - the largest cryptocurrency exchange in the US - is facing an investigation by Washington authorities.

According to Bloomberg's source, regulators are investigating whether Coinbase allowed Americans to trade digital assets illegally. These assets are likely to have to be registered as securities. Coinbase's share price plunged 20%.

Meanwhile, the New York Times reported that the Kraken exchange is also being investigated by the US Treasury Department.