The bitcoin price has dropped to under $35,000, its lowest since July last year, as “extreme fear” grips traders in the aftermath of the Federal Reserve’s biggest interest rate hike in years.
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This week’s bitcoin and crypto crash has triggered a sharp fall in market sentiment, as measured by the Bitcoin Fear and Green Index which collects data from social media posts, surveys, volatility and trading volume. The gauge has now fallen into “extreme fear” territory, dropping further after trending lower through April.
Stock markets have also lost ground this week with the Nasdaq recording its longest weekly losing streak since 2012.
“The correlation between cryptocurrency and equities has been discussed fairly extensively after bitcoin and the tech-heavy Nasdaq displayed a higher positive correlation than was initially expected,” Tammy Da Costa, an analyst at DailyFX, wrote in emailed comments, noting that predictions made before Russia’s war in Ukraine were made under the assumption that once interest rates began to rise, supply and demand would meet.
“Over the past week, fundamentals have included interest rate expectations and nobody can ignore the ongoing war which continues to place pressure on supply constraints, particularly for commodities.”
Market pressure, weighing on both crypto and equities, includes concerns over soaring inflation, an increasingly hawkish Federal Reserve and fears over a consumer spending pullback.
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Smaller cryptocurrencies that have outpaced the likes of bitcoin and ethereum in recent months have fallen harder during this latest crash.
“The future of individual coins or tokens remains dubious, the law remains in control of such solicitations and the approval of social media giants such as Elon Musk,” added Da Costa.
Terra’s luna, used to stabilize the price of the protocol’s stablecoins, has crashed more than 20% in the last week alone even as the Luna
Some have speculated a “massive UST sell-off” on the decentralized exchange Curve sparked rumors UST could lose its peg to the dollar, in turn causing the price of luna to fall further. The rumors were dismissed by Terra creator Do Kwon on Twitter.