Crypto assets bled nearly $800 billion in market value over the past month, hitting a low of $1.4 trillion on Tuesday, according to data site CoinMarketCap, as the end of loose monetary policy dampens appetite for risk assets.
Bitcoin, which accounts for nearly 40 percent of the crypto market, hit a 10-month low on Tuesday, before recovering to $31,450, just six days after touching $40,000. It was more than 54 percent below its all-time high on November 10, $69,000.
Digital asset prices have tumbled, reflecting a slump in stocks over fears of aggressive interest rate hikes around the world to stave off decades-high inflation. The tech-heavy Nasdaq fell 28 percent from its November 2021 all-time high.
The total value of the crypto market was at $2.2 trillion on April 2, well below its all-time high of $2.9 trillion in early November, according to CoinMarketCap.
“Bitcoin remains highly correlated to broader economic conditions, suggesting that the way forward may unfortunately be difficult, at least for the time being,” blockchain data provider Glassnode said in a note.
Signs of weakness in stablecoins, usually a safer crypto currency, further spooked investors. TerraUSD, the world’s fourth largest stablecoin, lost a third of its value on Tuesday as it lost its peg to the dollar.
Despite the drop in the price of bitcoin, funds and products linked to it saw inflows of $45 million last week as investors took advantage of weak prices, according to digital asset manager Coinshares in a report published on Thursday. monday.
“Huge amount of liquidity that has inflated some of these cryptocurrencies,” said Sebastien Galy, senior macro strategist at Nordea Asset Management. He expects cryptocurrencies, also correlated to high-growth stocks, to come under pressure as various central banks tighten monetary policy.