Investors in stocks as well as crypto are making very clear over the past month that we are in a risk-off environment.
Bitcoin, Ethereum, and the other leading cryptocurrencies all fell further over the weekend, erasing mild gains made during the week prior. The global crypto market cap is down to $1.03 trillion, a 7.5% drop in just 24 hours, according to CoinMarketCap.
Bitcoin is down 18% in the past seven days and has fallen below $26,000 to $25,513, its lowest point of 2022 and a 12-month low. Ethereum has fared even worse, down 28% in the past week, even after a mostly successful merge test drive on Wednesday on the Ropsten testnet. (On Friday, Ethereum core devs shared their decision to delay the “difficulty bomb,” a crucial step in The Merge, for another two months, which may not have helped sentiment around ETH.)
It wasn’t just BTC and ETH. Every single one of the top 20 coins by market cap has fallen double-digit percentages in the past seven days.
BNB is down 22% in the past week, Cardano (ADA) down 24%, XRP down 18%, Solana (SOL) down 31%, Dogecoin (DOGE) 28%, Polkadot (DOT) 28%, Avalanche (AVAX) 35% and Polygon (MATIC) 25%.
The crypto market has not looked steady all year after a huge bull run in 2020 and 2021, but the current Crypto Winter began in earnest in the first week of May, when major coins fell along with the stock market. Then the Terra ecosystem (UST and LUNA) went down in flames (though a Chainalysis report this week linked Bitcoin’s decline more to the broader tech stock selloff, not to Terra). Since then, tech stocks have continued to take a beating and crypto has fallen further. The slide intensified this past week along with the CPI reading for the month of May, which showed consumer goods prices rising 8.6% compared to May 2021, the highest year-over-year inflation figure since 1981.
For years, Bitcoin was pitched as a hedge against inflation, but it has not behaved that way in 2022, and in January of this year hit its highest level of correlation with the S&P 500 and Nasdaq since 2020.
For the moment, crypto and tech stocks are going down hand in hand.