The cryptocurrency market has continued its slide from last week, mirroring the fall of the broader stock market. The world’s largest cryptocurrency, bitcoin, fell to $31,075.70 on Monday evening, a 10% drop from Sunday at 5 p.m. EDT. Bitcoin’s price has fallen 54% from its record high of $67,802 in November. It is on track for the worst five-day stretch since the five days ended March 16, 2020, when it fell almost 38%. Ethereum, the second-largest cryptocurrency, fell Monday to $2,286.10, almost 10% below the price Sunday evening.
With more professional investors trading crypto, the market has increasingly moved in tandem with traditional markets. Many institutional investors that buy cryptocurrencies treat them as risk assets, similar to technology stocks. Investors tend to retreat to safer corners of the market during turbulent bouts. The stock market dropped last week the day after the Federal Reserve announced a rate increase of a half point, the biggest since 2000, to battle inflation. Fed Chairman Jerome Powell said there could be additional increases during the summer. The central bank is also unwinding some of its $9 trillion asset portfolio. The tech-heavy Nasdaq Composite hit a new 52-week low on Monday, falling 26% year to date. Crypto prices have been stagnant for much of 2022 as investors brace for rising interest rates. The crypto market has been active over the past 24 hours, with almost $155 billion in market volume in that period, according to CoinMarketCap. The global crypto market fell to $1.4 trillion. Cryptocurrency companies have been working to become household names. Flush with venture-capital investment, crypto platforms have been spending more cash on lobbying efforts and marketing directly to consumers. Inflation fears, worries about big interest rate hikes from the Federal Reserve and jitters about a possible economic slowdown have rattled Wall Street and sent bond yields skyrocketing. The 10-year Treasury bond yield is now hovering just above 3.1%, having more than doubled this year. Long-term bond yields are now at their highest level since November 2018. The surge in yields has also helped lift the value of the dollar, which tends tor rise in tandem with interest rates. The US Dollar Index is now trading near its highest level in twenty years. That's bad news for bitcoin too, as many crypto backers point to dollar weakness as a bullish sign for digital currencies. As rates (and the dollar) continue to climb, some crypto skeptics think the selling in bitcoin has only just begun. The Federal Reserve is starting to pull back on monthly bond purchases and other stimulus which could be bad news for all sorts of speculative assets. "The dramatic reversal of Fed liquidity ... will collapse the pandemic era bubble in crypto currencies, money losing tech companies and meme stocks," said Jay Hatfield, chief investment officer of Infrastructure Capital Management and manager of the InfraCap Equity Income ETF.
