Crypto Market Plunges as Fed Rate Hike Expectations Rise

The crypto market has taken a hit over the past day, with major cryptocurrencies leading the decline. Bitcoin's price dropped around 2.7% to $63,400, while Ethereum fell more than 3.2% to $1,874.

The total crypto market capitalization has decreased to $2.24 trillion from $2.30 trillion in the previous day. The sell-off is not limited to cryptocurrencies; technology and semiconductor stocks are also under pressure.

One of the key reasons for the decline is the upcoming FOMC meeting, where traders expect a 25-basis-point hike in interest rates instead of keeping them unchanged. This has increased the odds of a rate hike on the CME Fed Watch tool to around 37%, compared to roughly 10% a week ago.

The higher interest rates can negatively impact cryptocurrencies and growth stocks, as investors may prefer safer assets with better returns. The decline in technology and semiconductor stocks is also causing concerns about the global AI investment boom moving too fast.

Investors have poured significant amounts into AI infrastructure, but the market is now questioning how quickly those investments will generate returns. This pressure has reached U.S. markets, with Nvidia falling around 5% and other AI-linked stocks coming under pressure.