Today, Bitcoin has fallen 15%, sliding below $40,000 for the first time since March 15. Meanwhile, Ethereum lost 14% of its value, falling below $3,000 for the first time since March 23. It’s part of a bigger trend, with crypto markets falling 8.5 percent in 24 hours to $1.84 trillion in market capitalization, according to CoinMarketCap.
If you’re searching for plausible answers for the meltdown, the stock market is a good place to start. The S&P 500, a stock index of the 500 largest publicly traded businesses in the United States, fell 1.7 percent on Monday, the Dow Jones Industrial Average fell 1.2 percent, and the tech-heavy Nasdaq lost 2.2 percent of its value.
Bitcoin, which has previously been connected with the values of other cryptocurrencies, has recently become more correlated with stock prices. BTC’s price correlation with the S&P 500 reached 0.49 in March, with -1 indicating that they move in completely opposing directions and 1 indicating that they move in perfect lockstep. According to Arcane Research, it was the highest rate since October 2020.
What factors are influencing prices?
You could take your pick from either the ongoing Russian conflict in Ukraine, the fresh round of COVID restrictions in China, or , of course, the Federal Reserve’s determination to hike interest rates rapidly and suffocate the economy’s money supply.
Last week, the Nasdaq was already down roughly 4% from Monday to Friday. Things haven’t gotten much better over the weekend. According to BitMEX creator Arthur Hayes, crypto market caps may collapse as the Fed strives to combat inflation by pushing less money into the economy. On Sunday, the billionaire investment banker-turned-crypto entrepreneur warned of “future crypto carnage” and projected that Bitcoin and Ether would plummet even more.
He predicted that “Bitcoin and Ether would bottom well before the Fed moves and reverses its policy from tight to lose.” Before the end of June, he expects them to test the $30,000 and $2,500 levels.
When the price of Bitcoin was below $5,000, Hayes forecasted that it will reach $10,000 in 2019. That proved to be accurate, as the price rose to above $12,000. He predicted that BTC would achieve $50,000 this year and would bottom out between $3,000 and $5,000 a year ago. While he was well wrong on the first forecast, he was spot on on the second.
Bitcoin bulls are hopeful that Hayes’ latest projection is incorrect. However, a look at today’s market changes suggests otherwise.