The news on Friday that US inflation reached 8.6% in May has caused some investors to abandon riskier assets such as cryptocurrency.
The large US-based bitcoin lending provider Celsius Network suspended withdrawals and transfers, citing “extreme” conditions.
The move caused the value of cryptocurrencies to dip below $1 trillion for the first time since January of last year.
Bitcoin dropped to $23,476 (£19,300) on Monday following the announcement.
Ether, the second-largest cryptocurrency behind bitcoin, fell as much as 16 percent to $1,177 (£967), its lowest level since January 2021.
Binance, one of the largest cryptocurrency exchanges in the world, halted bitcoin withdrawals, with CEO Changpeng Zhao blaming a “stuck transaction” for the backlog.
He stated that monies were secure.
Senior financial and markets analyst at Hargreaves Lansdown, Susannah Streeter, remarked, “As inflation shows to be an even more difficult foe to defeat than anticipated, Bitcoin and Ether continue to take significant punishment in the ring.
“They are the primary victims of the flight from risky assets as investors concern over soaring global consumer prices.”
Inflation in the United States reached a record 40-year high of 8.6% in May due to rising energy and food prices, as reported on Friday.
The figure exceeded expectations, dashing optimism that inflation had reached its peak.
The fear that the Federal Reserve, the US central bank, will continue to raise interest rates was sparked by soaring US prices.
There is increasing speculation that rates could increase by three-quarters of a percentage point this week for the first time since 1994.
Higher interest rates can discourage investors since they increase the cost of borrowing.
On Monday morning, US equities began substantially lower, with the S&P 500 inching closer to a 20 percent drop from its peak earlier this year.
In the first hour of trading, the S&P 500 was down 2.7%, while the Dow Jones Industrial Average down 855 points, or 2.7%, as of 11:15 a.m. Eastern time (4.15pm UK time). The Nasdaq composite decreased by 3.2%.
The FTSE 100 fell 1.7%, while the DAX fell 2.7% in Europe. The French CAC 40 index lost 2.7%.
In Asia, markets plummeted by at least 3 percent in Seoul, Tokyo, and Hong Kong, as growing COVID-19 cases and tighter restrictions in China stoked investor anxiety.
