Notable drop in cryptocurrencies after Fed's inflation alert

New setback in the cryptocurrency market. Bitcoin (BTC) has fallen sharply in the last 24 hours, dropping about 1.7% and falling back to $28,600. Ethereum (ETH) has followed in its wake and has given ground to the edge of $1,800, a level it has lost.

Analysts agree that this downward movement reflects the clear risk aversion that has taken hold in the stock market. Michael Hewson, chief market analyst at CMC Markets UK, commented that Wednesday's fall on Wall Street was driven by concerns about China's economy and the sharp slowdown in domestic demand, but also by Fitch's warning of a possible rating cut for large banks such as JP Morgan, Bank of America and Goldman Sachs.

On the other hand, the market has not been amused by the fact that the Federal Reserve (Fed) sees upside risks to inflation. The minutes of the US central bank's July meeting reflected its officials' conviction that prices could continue to rise in the coming months, which would inevitably lead to a further tightening of interest rates, something that the market seemed to have already taken for granted.

Given such risks, the body considers it "critical that the stance of monetary policy be sufficiently restrictive for inflation to return to the Committee's 2% objective over time." In addition, the participants of the Federal Open Market Committee (FOMC) warned about the possibility "that the cumulative tightening of monetary policy could lead to a sharper-than-expected slowdown in the economy, as well as the possibility that the effects of tighter bank credit conditions could turn out to be more substantial than expected".

The high volatility experienced in the last trading day comes on the heels of several weeks of price inaction and a report from the Commodity Futures Trading Commission (CFTC) that reflected a prominent increase in short positions versus long positions in Bitcoin futures. Since August 12, the reigning cryptocurrency has retreated 18%.

On the business side, yesterday, on Wednesday, the main event was the news that Coinbase received approval from the National Futures Association (NFA) to offer cryptoasset futures to its customers in the United States. The global crypto derivatives market accounts for approximately 75% of cryptocurrency trading volume worldwide and is a key access point for traders. After starting the session with outstanding gains, the stock ended the session slightly lower.

In other market news, there have been notable declines in the major altcoins. Ripple (XRP) dropped 2%, Dogecoin (DOGE) fell 3% and Cardano (ADA) and Solana (SOL) retreated 1%.