The sector is under pressure from a combination of monetary and legal factors. The likelihood of further monetary tightening by the US Federal Reserve has increased significantly following macroeconomic data and comments from officials. In May, the Personal Consumption Expenditures Price Index, closely monitored by the regulator, rose from 3.8% to 4.1%, while the core indicator increased from 3.3% to 3.4%, both significantly above the 2.0% target. First-quarter Gross Domestic Product expanded by 2.1%, compared with expectations of 1.6%, while the labour market remains stable: unemployment has held at 4.3% for several months, and non-farm payrolls reached 172.0 thousand. These conditions allow the Fed to maintain a hawkish stance, supporting the US dollar and reducing investor appetite for risk assets. According to the CME FedWatch Tool, most experts expect at least one interest rate hike this year.
Digital assets are also being negatively affected by the decline in technology stocks, which began after Apple Inc. announced price increases for Mac computers, iPads, and other devices. This has raised concerns that higher hardware production costs could reduce investment in the artificial intelligence sector. In addition, the US House of Representatives approved a Senate housing bill that includes a provision banning the national regulator from issuing a government-backed stablecoin for four years. Lawmakers had previously included similar restrictions on creating a CBDC in other documents, but this is the first order of its kind to be sent to President Donald Trump for signature. Meanwhile, the long-awaited Digital Market Clarity Act, or CLARITY Act, whose key House hearings are scheduled to begin on July 17, is facing growing opposition both in Congress and among the public, putting its approval in doubt. Many experts are dissatisfied with the absence of provisions preventing sitting politicians from profiting from cryptocurrency businesses. Several public organisations, including the National District Attorneys Association, are concerned that CLARITY could hinder investigations into illegal activity and weaken customer identity verification requirements for crypto companies. The unresolved nature of these issues is destabilising the industry, leaving overall investor sentiment negative, as reflected in the Fear and Greed Index, which has fallen to 13.
Overall, conditions in the cryptocurrency market continue to deteriorate. In the near term, most leading digital assets may continue their negative performance or move into consolidation.
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