Crypto markets took a dive this week, with the total cryptocurrency market cap falling below $1 trillion for the first time since January 2021.
The recent economic uncertainty has sent crypto investors running for the door.
The crypto market suffered another massive loss over the weekend, with Bitcoin dropping 17% to a yearly low of around $23,639. The second-largest cryptocurrency, Ethereum, also suffered a 27.3% plunge in value during that same time frame.
The Federal Reserve has raised interest rates 75 basis points since last year, but inflation continues to rise to make for more aggressive hikes in the future. The Federal Reserve wants to slow down economic growth by raising rates so that inflation will stay under control. But doing so negatively impacts risk-on assets such as equities and cryptocurrencies.
The cryptocurrency market has shed over $800 billion in value since the Fed first committed to raising rates earlier this year. The cryptocurrency market is taking a nose dive. In March, the sector's total value was around $1.8 trillion; now, data from CoinMarketCap shows that it has dipped below one quadrillion for the first time since January 2021.
Bitcoin is doing just fine in this bearish market, with prices holding steady and not dropping like other crypto assets. Bitcoin continues to dominate the cryptocurrency markets, with its market share increasing by over 6% in recent weeks. This seems like a clear sign that investors are fleeing smaller and more volatile coins for Bitcoin instead.
The NASDAQ 100, heavily stocked with tech stocks, has seen its futures contracts slide by 3% in the early hours of trading today. The correlation between crypto-assets and traditional equities has been relatively high in recent months. The already-ailing crypto market is likely to see even more pressure due to ongoing weakness in the NASDAQ 100 and S&P 500.
Crypto markets continue to be volatile as economic factors and sector-specific issues weigh on the industry. Celsius announced today that the crypto lending platform had frozen customer withdrawals, swaps, and transfers due to "extreme market conditions." The development follows weeks of rumors that the crypto lender could face insolvency issues due to the decline in the crypto market.