Crypto wrap: Profit booking, UK inflation data pull major tokens down

After a good show in the first half of the week, major crypto tokens saw major sell-off

Cryptocurrency markets started the week on a high but dropped in the middle of the week after investors booked profits and data from the United Kingdom (UK) showed high inflation. On Friday, the crypto market cap was down nearly 2 per cent, according to data by CoinMarketCap. In the last seven days, Bitcoin was down 9 per cent.

"For most of the week, the markets were in the green with a rally led by Bitcoin and Ethereum. However, the crypto market changed its course mid-week, with investors turning more risk-off and booking profits from the recent rally in crypto prices," said Parth Chaturvedi, crypto ecosystem lead at crypto exchange CoinSwitch.

Another major reason was the unexpectedly high UK inflation numbers released on Wednesday.

"The UK inflation figures revealed a 10.1 per cent increase in the 12 months, sending Bitcoin to its lowest point since April 10. The market reacted predictably to this unexpected event, with investors moving away from riskier assets," said Alankar Saxena, chief technical officer (CTO) and co-founder of crypto platform Mudrex.

"It may take some time for investors and traders to evaluate the potential impact of the inflation data and recover from the event," he added.  

Bitcoin was trading at $28,041 on Friday and Ethereum at $1,915.

Ethereum underwent a major update "Shapella" last week which allowed people to withdraw their earlier staked tokens. The token saw a major sell-off after the company announced the completion of the process. It has fallen nearly 9.5 per cent in the last seven days alone.

Another major event during the week was the European Parliament passing legislation on bringing in new rules for the cryptocurrency industry across the 27-country bloc.

The new rules are expected to create a level playing field for crypto businesses and prevent unfair competition practices.

"It is one the first kinds of crypto regulations that would bring new rules for the industry across 27 countries in the EU. This comprehensive legal framework would encourage more technological innovations. It would also increase investor confidence in the crypto industry by promoting transparency, reducing fraud, and preventing money laundering. The new regulations will also lead to greater adoption of cryptocurrencies by businesses and individuals alike," said Edul Patel, CEO and co-founder of Mudrex.

G20, being held in India this year, is also expected to come up with rules related to crypto by the end of 2023.