(Bloomberg) Bitcoin dropped back below the closely watched $30,000 level amid a wider retreat in cryptocurrencies, as stubbornly high UK inflation fanned fears of higher-for-longer interest rates.
The largest digital token fell as much as 4.5% before paring some of the slide to trade at about $29,276 as of 3:05 p.m. in New York on Wednesday. Bitcoin has traded on either side of the benchmark number after reaching that level last week for the first time since June.
Ether shed 5.6% and smaller tokens like Solana and Avalanche suffered steeper declines. Crypto-related stocks such as Coinbase Global, Marathon Digital and MicroStrategy also slumped.
The bulk of the decline came after UK consumer-price data on Wednesday showed inflation remained above 10% in March, adding to recent signs that central banks will have to keep lifting borrowing costs. That’s giving traders pause after Bitcoin surged about 80% this year, a rally driven in large part by speculation that rate cuts were imminent.
Read more: UK Inflation Sticks Above 10%, Lifting Prospect of Rate Hike
The sudden selloff triggered liquidations of $175 million worth of long positions across crypto markets, data from Coinglass showed.
“This seems to be a classic liquidation and structural market reaction,” said Vetle Lunde, senior analyst at K33 Research.
Economic indicators from the US this month have also undermined the notion that a crisis among regional banks will force the Federal Reserve to abandon tightening. A key measure of US inflation showed signs of easing in March, but probably not enough to keep Fed officials from changing tack. In addition, US workers are seeing pay increases outpace inflation.
Yet the recent interest-rate jitters are unlikely to derail this year’s crypto rally, according to Fadi Aboualfa, head of research at digital-asset custodian Copper. He pointed to the positive funding rate — where long investors pay a small fee to short traders — as indicating overall bullish sentiment.
“From what we’ve noticed speaking to different hedge funds, many are continuously allocating to Bitcoin after being on the sidelines,” he said in an email. “We’re certainly not seeing any fundamental shift.”