Bitcoin BTC , ethereum and other major cryptocurrencies have suddenly crashed, wiping $400 billion from the combined crypto market since Friday.
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The bitcoin price has fallen dramatically toward $30,000 per bitcoin, down 20% from over $40,000 last week. Ethereum and its biggest rivals BNB BNB , solana, cardano and avalanche had fallen even more steeply, each losing between 15% and 20%. Ripple’s XRP XRP is also down around 15%.
The brutal bitcoin and crypto price crash was triggered first by the U.S. Federal Reserve sharply hiking interest rates last week, also crashing stock markets, and then exacerbated by the fast-growing algorithmic stablecoin TerraUSD (UST) struggling to maintain its $1 peg as its support cryptocurrency luna leads market lower with a blistering 30% plummet.
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“In highly volatile markets, all asset classes will move in lockstep,” Michael Safai, managing partner at crypto trading firm Dexterity Capital, said in emailed comments, pointing to soaring inflation and fears over more Fed monetary tightening worrying investors.
Safai warned that if the bitcoin price crashes under $30,000 fears over “ripple effects” will spread.
“Enthusiasm for what’s being built in crypto hasn’t faded, but if we go further below $30,000, the market will naturally be worried about the ripple effects, such as miners turning their machines off as they move out of profitability. $25,000 isn’t a worst-case scenario here, and the market may be bracing itself for that reality.”
Other bitcoin and crypto market watchers have also warned over sell-off “momentum” building.
“Investors exiting positions may be adding some momentum to the protracted sell-off that we’ve witnessed over the past few days,” analysts at Bitfinex wrote in an emailed note.
That momentum was partly driven by Terra’s algorithmic stablecoin UST slipping from its dollar peg over the weekend, falling further today even after Do Kwon, the founder of the project’s developer Terra Labs, promised to “deploy more capital” to help maintain the UST price.
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However, some have pointed to this week’s U.S. inflation data, due Wednesday, as potentially offering some relief to both crypto and stock markets.
“All is not lost for bitcoin yet,” Yuya Hasegawa, crypto market analyst at Bitbank, wrote in emailed comments.
“April’s U.S. consumer price index (CPI), which will be the main event for the week, could be a turning point for the price. If the CPI shows no sign of slowing down, it will add to the fear of faster monetary tightening, but other inflation metrics are starting to slow down and the April CPI could follow suit, which in turn will likely alleviate the market’s concern and help recover its risk sentiment.”
The president of El Salvador, who has spearheaded the country’s adoption and accumulation of bitcoin over the last year, remains bullish on bitcoin, announcing he’s “bought the dip” by adding 500 bitcoins at an average price of around $30,744 to El Salvador’s stash.