$130 billion wiped off crypto markets in 24 hours as bitcoin

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, they fell to their lowest points since July. They are also about 50% off their respective 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.

“It’s possible that macro economic concerns, such as the Fed’s response to inflation rates, have facilitated more de-risking activity in general,” said Juthica Chou, head of OTC options trading at Kraken. “The recent price drop, coupled with high volatility, could be leading to further selling as participants look to reduce risk.”

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.

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 have said there’s concern a more hawkish Fed could take the wind out of the crypto market’s sails.

“Looking forward, our most immediate concern is how equities markets respond to this week’s Fed meeting, especially after having just endured their worst week since the global onset of Covid,” said Leah Wald, CEO at digital asset investment manager Valkyrie Funds.

“A consolidation in stocks would lead to a risk-on environment where traders are more willing to take on additional risk assets such as bitcoin,” she added, “since digital assets have become increasingly correlated to equities as more companies continue to add bitcoin to their balance sheets. Volatility is likely to be a feature of bitcoin for at least the short-term, as traders figure out where market sentiment is following this week’s Fed meeting.”