Ethereum drops 7% amid wider crypto sell-off as traders assess rate uncertainty

• Ethereum fell as much as 7% and bitcoin fell 3% in under 30 minutes early Wednesday.
• Altcoins are taking hits too, with solana and polygon down 8% and 5%, respectively.
• It's unclear what led to to the sell-off, but markets have been sensitive to signs of central bank tightening. 

Ethereum dropped as much as 7% on Wednesday amid a broader crypto market sell-off as traders navigate a murky environment.

Bitcoin fell almost 3% in under 30 minutes early this morning, according to Messari. Meanwhile, altcoins are taking hits too, with solana and polygon down 8% and 5%, respectively.

Although it's unclear what exactly led to the downtrend in prices, markets have been sensitive to signs of central bank tightening. 

The Federal Reserve has consistently hiked rates for over a year to combat decades-high inflation, and it is widely expected to raise rates by another 25 basis points next month.

Overseas, consumer price index data indicated that UK inflation remains above 10%, meaning the Bank of England may need to raise interest rates further. 

"After last month's shock CPI reading, today's print still shows double-digit inflation," Giles Coghlan, chief market analyst at financial services firm HYCM, told Insider in a statement. "This is a sign that inflation is not yet back on track and the longed-for decline towards pre-Covid levels is not quite there."

Coghlan added: "The question investors will be asking now is, where does the Bank of England go from here?"

Other experts said recent inflation data did not play in the market downturn. Rather, it was a large crypto holder, commonly known as a "whale," offloading a massive position on an exchange. 

"It may have been caused by a whale that sold about 16,000 BTC on Binance at the market," Timothy T. Shan, COO at decentralized exchange Dexalot, told Insider. "This subsequently triggered an overall derisking amongst longs (including levered longs) across the market."

Alex Altgausen, CEO at blockchain gaming startup Banksters, pointed to Binance enabling withdraws of staked ether following Ethereum's latest software upgrade. 

"ETH's price decrease can be attributed to the activation of ETH unstaking on Binance. After years of waiting, people are now able to unstake and sell their profits, which is contributing to the drop in price," Altgausen told Insider.

Volatility has returned to the market after months of upside for digital assets.

Ethereum notched an 11-month high after its highly-anticipated Shanghai upgrade, also known as "Shapella," last week. Elsewhere, bitcoin hit a 10-month record and has soared 39% in the past three months.