Bitcoin Crashes to 22-Month Low as Inflation Fears and Hawkish Fed Send Prices Plummeting

Bitcoin's second-quarter rally came to an abrupt end as inflation and hawkish Federal Reserve expectations sent the cryptocurrency plummeting to its lowest level in over a year. The price of Bitcoin dropped by around 30% from its early May peak, falling below the crucial $60,000 mark before slipping to a fresh 22-month low at $57,749.

The decline was driven by a combination of deteriorating macroeconomic conditions and a dramatic shift in US monetary policy expectations. The release of stronger-than-expected US consumer and producer inflation data sparked concerns that higher energy prices were feeding through into broader inflation, prompting investors to reassess Federal Reserve policy.

Market expectations rapidly shifted towards pricing in the possibility of renewed rate hikes under new Fed Chair Kevin Warsh. This triggered widespread selling across assets viewed as potential hedges against long-term currency depreciation, including Bitcoin, gold, and silver.

The largest wave of spot Bitcoin ETF outflows since their launch added to the downward pressure. Over $4 billion left US spot Bitcoin ETFs during a prolonged multi-week outflow streak, with BlackRock's iShares Bitcoin Trust (IBIT) recording some of its largest daily and weekly withdrawals on record.