(Bloomberg) — Cryptocurrency losses accelerated, with popular Defi tokens such as Cardano and Avalanche falling more than sector bellwether Bitcoin, as risk aversion sweeps through financial markets.
Bitcoin dropped as much as 7.7% to $39,796, the first time the largest cryptocurrency by market value has been below $40,000 since March 16. Ether, the second largest, was down as much as 9.5%, dipping below $3,000. Altcoin, or alternative coin, Luna was down around 11%, while Avalanche was off 13% and Cardano slumped 11%.
Since peaking at just above $48,000 in late March, Bitcoin — and other tokens — have been dragged lower by concerns about tighter monetary policy. Even the buzz around last week’s Bitcoin 2022 conference in Miami wasn’t enough to reverse the trend.
“Historically, altcoins have a tendency to over perform Bitcoin to the downside in strong bearish trading environments,” said Josh Olszewicz, head of research at crypto investment firm Valkyrie. “Altcoin trading participants often have less longer-term conviction.”
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U.S. inflation likely accelerated to 8.4% in March, the fastest pace since early 1982, economists surveyed ahead of data due Tuesday predict. The Federal Reserve may need to hike interest rates above 4%, Goldman Sachs Group Inc. Chief Economist Jan Hatzius said Friday.
“Fed tightening by 0.5 percentage point steps at upcoming meetings as well as $95 billion per month balance sheet run-off sent crypto markets spiraling lower,” Teong Hng, chief executive of Hong Kong-based Satori Research, said.
Bitcoin has been in a trading range of around $35,000 to $45,000 for much of the year so far. A breakout above $48,000 last month briefly erased its losses for the year, but the token hit resistance around its 200-day moving average.
Bitcoin’s tendency to move in sync with assets such as U.S. tech stocks makes the drop less of a surprise after a tough week for American markets. Its correlation with the Nasdaq 100 Index is now back at record levels.
“The Nasdaq 100 closed below its 50-day moving average on Friday, so now wouldn’t be a bad time for Bitcoin to break its correlation with the tech-laden index,” said Antoni Trenchev, managing partner of crypto lender Nexo, in emailed comments. “Close above $45,000 again and we’re back in the game.”
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