Why is crypto down today? Crypto prices are tanking this morning, and the losses pile atop existing downward trends for a lot of currencies. Market leaders like Bitcoin (BTC-USD) and Ethereum (ETH-USD) are suffering seven-day losses of over 10% apiece. These losses are hampering most of the market. Well, it looks like a number of broad economic factors are spooking the crypto asset class; these factors influencing digital currency investing are also hampering the traditional stock market.
Today’s losses are a reality check for investors who thought crypto was primed for a 2021-esque price boom. Indeed, Bitcoin’s $10,000 hike from mid-March to early April had many a crypto bull expecting the movement to preface something bigger. Unfortunately, that’s proving more difficult than expected, as BTC prices tumble by over $5,000 since then.
But Bitcoin isn’t seeing the worst of the losses; the bearishness is rocking altcoins even harder. Of the 50 largest cryptos by market capitalization, the only play not seeing losses on the week is Monero (XMR-USD). Others are losing anywhere from 5% to nearly 50%; some of the hardest hit currencies include Terra (LUNA-USD) and Ripple (XRP-USD). Even exchange giant Binance (BNB-USD) is bearing losses of 10%.
So, why is crypto down today? The answer can be found in broader stock market trends, as well as some recent scares brought on by the central bank.
Why Is Crypto Down Today? Falling Tech Stocks and the Fed Point to an Answer.
The Federal Reserve has contributed its fair share to crypto uncertainty in recent months. Indeed, the speculative investing boom that allowed the crypto market to flourish throughout 2021 is the result of the Fed’s response to the coronavirus pandemic. Lowered interest rates, atop vastly increased Fed spending, created a market that was kind to aggressively speculative investments. Being a nascent market, crypto was a haven for exactly this type of investing.
The market was shocked several times as 2021 turned into 2022, and the Fed signaled its plan to hike rates and taper spending. In recent meetings, the plan is becoming more of a reality as rate-hike plans firm up. Last week’s Fed meeting caused the first wave of bearishness that is washing over the market today. Officials announced plans to slash spending by $95 billion per month, beginning as early as next month. This comes just weeks after the first rate hike by the central bank.
While these factors are leading to a pullback for speculative investing, crypto is one of the industries suffering the most. But there’s another factor that some crypto industry leaders believe to be driving prices down. Arthur Hayes, co-founder of the BitMEX crypto exchange, theorizes that the recent downswing in crypto prices is the fault of the tech industry. Hayes says that faltering tech stock prices are hampering the crypto industry. He and many others believe the tech industry holds great influences on crypto prices. And, he says that this could spell more trouble. With Bitcoin becoming even more closely tied in price movement to the Nasdaq-100, the currency loses its appeal as a means to diversify one’s portfolio.
On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.