On Monday, Bitcoin dropped below $24,000, hitting its lowest level since December 2020, as investors dump crypto amid a more expansive sell-off in risk assets. Meanwhile, a crypto lending company called Celsius has halted withdrawals for its customers, sparking fears of contagion into the broader crypto market. The world’s biggest cryptocurrency Bitcoin dropped below the $24,000 mark, according to CoinDesk data, and traded around $23,325 at 10 a.m. on Wall Street, for a loss of 15%.
The Crypto Market Capitalization Plunged Below $1 Trillion
Over the weekend and into Monday morning, more than $200 billion had been wiped off the entire crypto market. The crypto market capitalization plunged below $1 trillion on Monday for the first time since February 2021, according to data from CoinMarketCap. Macro factors are contributing to the bearishness in the crypto market, with rampant inflation continuing and the U.S. Federal Reserve is expected to hike interest rates this week to control rising prices.
The Drop in Cryptocurrency Prices is Due to Current Inflation
Last week, U.S. indices traded off heavily, with the tech-heavy Nasdaq dropping sharply. Bitcoin and other cryptocurrencies have tended to correlate with stocks and other risk assets. When these indices fall, the crypto market drops as well. “Since Nov 2021, sentiment has changed drastically given the Fed rate hikes and inflation management. We’re also potentially looking at a recession given the FED may need to finally tackle the demand side to manage inflation,” stated Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno.
“All this points to the market not completely having bottomed and unless the Fed is able to take a breather, we’re probably not going to see bullishness return,” Ayyar commented that in previous bear markets, bitcoin had dropped around 80% from its last record high. Currently, it is down around 63% from its last all-time high which it hit in November. “We could see much lower bitcoin prices over the next month or two,” Ayyar said.