Crypto Prices Plummet as ECB Raises Rates and Fed Hike Expectations Rise

The cryptocurrency market experienced significant losses as the European Central Bank raised its deposit rate by 25 basis points to 2.5%, and investors increasingly expect a Federal Reserve hike. The move was widely anticipated, but the continued rise in energy prices and bond yields led to a tightening of conditions for leveraged and speculative assets.

The FedWatch tool indicates that traders now assign a nearly 70% probability to a quarter-point increase at the September meeting. This would lift the Fed's target range from 3.50%-3.75% to 3.75%-4.00%. The producer price index rose 5.4% from a year earlier, slightly above the consensus, pushing traders to reassess their expectations.

Crypto prices fell as investors reduced risk and cut leveraged positions, leading to larger declines in several major altcoins. Bitcoin traded near $77,000 after losing roughly 2%, while Ether was also down about 2%. Smaller cryptoassets like BNB, XRP, Solana, and Dogecoin saw losses of 4-6%.

The ECB's decision has already affected the market, but the prospect of further European tightening leaves less room for investors to assume global financing conditions will ease soon. A possible Fed increase adds pressure in the dollar market, where most crypto trading and borrowing remains concentrated.