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The 10-Year Treasury Yield grew by 2.78% representing a three-year high. Events that push these yields to historic highs typically fuel the dumping of risky assets.
The global crypto industry experienced one of its worst days this year as a massive selloff hit the ecosystem, plunging the combined market capitalization by 4.68% in the past 24 hours to $1.86 trillion. Bitcoin (BTC) led the bearish rally, dropping 4.79% to $40,193.22. Earlier, the premier digital currency slumped to a daily low of $39,373.06, the first time the coin will be dropping to a price level below the $40,000 psychological level since mid-March.
The massive crypto selloff was a result of investors weighing in on global macro risks as regulations about monetary tightening in the US and the projected impact of the Russian-Ukrainian war came into focus again.
“Bitcoin and traditional markets have continued to respond negatively to expectations that the US Fed will tighten its monetary policy to fight inflation, and Tuesday’s CPI release seems to be weighing heavily,” said Riyad Carey, a research analyst at Kaiko. “Globally, the continuing war in Ukraine and increasing shutdowns in China are dragging on markets.”
The 10-Year Treasury Yield grew by 2.78% representing a three-year high. Events that push these yields to historic highs typically fuel the dumping of risky assets and Bitcoin as the crypto market lead has been showing a great correlation with the traditional stock market. For instance, the Bitcoin plunge models a related dip in the Nasdaq 100 (INDEXNASDAQ: NDX) which recorded a 2.35% dip to 13,990.20 on Monday.
Indications that the Federal Reserve’s Monetary Open Committee is also open to hiking interest rates in the near future as a measure to curb inflation are also making crypto investors take a cautionary approach. A hike in interest rate is bad for Bitcoin as the more traditional investors would be more tilted to investing in safe assets with minimal risks.
Expert Predicts More Massive Crypto Selloff in Q2
While Bitcoin may be seeing a slight bullish reversal after the Monday dumping, former BitMEX Chief Executive Officer, Arthur Hayes has predicted more mayday is ahead for cryptocurrencies. As reported by Coinspeaker citing his detailed blog post, Hayes said Bitcoin is poised to price in at $30,000 by the end of June, and Ethereum (ETH) is good enough for $2,500 within the same period.
Amongst the reasons for Hayes’s conviction that this new price action is imminent is the high correlation with the traditional stock market, growing inflation which the Feds are working assiduously to correct, and the hike in interest rate which will generally impact the Nasdaq 100 and the digital currency industry.
With the knowledge of what the market is expected to look like in the near term, Hayes says he is going long on crypto, and that he is buying Put Options to cushion whatever growth miss that might be experienced in the short term. The crypto veteran also said buying altcoins whose price has been beaten down by more than 75% is also a good strategy to reposition in the long term.