FX.co ★ Cryptocurrencies hit by sell-off amid market chaos

Markets have experienced turbulence with equities, crypto and gold markets being highly volatile. The volatility was likely caused by market players overestimating the Fed's policy, economists say.

Following the release of unexpectedly hot US inflation data, investors reacted in advance to the Fed's monetary policy decision, which is due on Wednesday.

With inflation reaching 8.6% y/y, the Federal Reserve would have to act more aggressively to bring rising prices under control.

The US dollar index, which tracks the performance of USD against six other major currencies, is trading near 104.97, the highest level in 20 years.

The yield of 2-year US Treasury notes touched a 15-year high of 3.25%, while the yield of 10-year Treasury bonds rose to 3.3%, the highest level of 2011. Rising Treasury yields increased pressure on assets such as gold. The yield curve of 2-year and 10-year bonds inverted on Monday, which is considered to be an indicator of imminent recession.

Cryptocurrencies:Crypto assets were hit hard by panic in the market, with BTC falling to $20,844.06, its lowest level since December 2020.

Ethereum decreased to $1076.18, the lowest level since January 2021. Over the past week, ETH plunged by 31.3%.

Amid the sell-off, Celsius, a major crypto lending company, froze all withdrawals and transfers on its platform.

Binance exchange halted BTC withdrawals due to a stuck transaction, but resumed them afterwards.

Over the past weekend and Monday, more than $200 billion were wiped off the crypto market.

The sell-off was caused by fear among market players and was triggered by Celsius's move. As a result, some investors fear that some cryptocurrencies could not withstand the ongoing market conditions.

However, the sell-off was likely triggered by the US inflation data, which was released on Friday.

Inflation in the US continues to accelerate, weighing down on the economy and forcing the Fed to act more aggressively.

Amid the current downtrend, bitcoin's key support level is at $20,000. BTC could also fall to $19,000.