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$130 billion wiped off crypto markets in 24 hours as bitcoin, ether drop to multi-month lows

KEY POINTS
  • The cryptocurrency market saw around $130 billion wiped off its value over the last day as major digital coins continued their multi-day sell-off.
  • Bitcoin and ether are off more than 50% from their all-time highs and trading at their lowest levels since July.
  • The movements in cryptocurrency markets have been correlated to the selling seen in higher risk assets like technology stocks as investors prepare for tighter monetary policy from the U.S. Federal Reserve and higher interest rates.

The cryptocurrency market had around $130 billion wiped off its value over the last 24 hours as major digital coins continued their multi-day sell-off.

Bitcoin was last down around 4% at $33,755.57, according to Coin Metrics, while Ether plunged 7% to $2,239.08. Earlier in the morning both fell to their lowest points since July and are each about 50% off their all-time highs.

Cryptocurrencies are moving in tandem with stocks, which have continued to fall since the beginning of the year and just came off of their worst week since March 2020. Investors have been selling risk assets like technology stocks as they prepare for tighter monetary policy from the U.S. Federal Reserve and higher interest rates.

“Looking forward, our most immediate concern is how equities markets respond to this week’s Fed meeting,” said Leah Wald, CEO at digital asset investment manager Valkyrie Funds. “A consolidation in traditional assets would catalyze a potential recovery in bitcoin, ether and other altcoins. Realistically, though, digital asset traders tend to be willing to take on more risk than traders in other asset classes, so we do expect some volatility in the coming days and weeks.”

Bitcoin approaching the $30,000 level

Given current market sentiment, bitcoin is likely to test the $30,000-$32,000 range, according to Vijay Ayyar, Luno’s vice president of corporate development and international expansion. If the cryptocurrency holds above $30,000 for as much as one week, there could be a base formed at those levels before the market moves higher, he said. However, it could be some time for the market to turn bullish given the lack of confidence across the spectrum, he added.

Several other analysts have said they see $30,000 as the next level of support for the cryptocurrency to test. However, analyst John Roque of 22V Research said bitcoin could fall even further. He said he too has been using $30,000 as a target but noted that the median historical bear market for bitcoin is down 78%. Bitcoin is currently about 50% off of its all-time high.

Investors are also grappling with rising inflation. Bitcoin proponents have long suggested the digital coin is a hedge against inflation, but that theory has not held up for many newer investors. As institutional interest poured into bitcoin last year, there are more short-term investors in the crypto market valuing bitcoin like a tech stock than ever before. Analysts say there’s concern a more hawkish Fed could take the wind out of the crypto market’s sails.

Meanwhile, investors are also assessing the impact of further regulation on the cryptocurrency market. Last week, Russia’s central bank proposed banning the use and mining of cryptocurrencies.

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