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Bitcoin recovered slightly after falling for seven straight sessions.
The $40,000 benchmark for Bitcoin is an important level because how the cryptocurrency performs from there could determine whether the market enters another bullish or bearish phase, according to experts.
"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," said Teong Hng, chief executive of Hong Kong-based Satori Research. Dogecoin and Shiba Inu dropped nearly 10 percent each but like the other coins, they too recovered by 4 percent and 20 percent, respectively.
Speculations are rife that Bitcoin may tumble to around $30,000 by June, according to Arthur Hayes, the co-founder of crypto trading platform BitMEX. Similarly, Ether, which already fell under $3,000 once could reach around $2,500. "Bitcoin and Ether are highly correlated to the Nasdaq 100. If the NDX tanks, it will take crypto down with it," said Hayes.
Investors are selling cryptocurrencies ahead of the mid-April tax deadline in the US, as per David Duong, head of institutional research at Coinbase Global Inc. This could be why the cryptocurrency market is in the fall. Interestingly, this trend was also seen in 2021. "Last year we saw market players selling digital assets to make tax-related payments," said David in a recent note. He further added that cryptocurrency investors are also souring on riskier assets as the Fed raises interest rates.
Furthermore, Bitcoin's nature of moving in line with assets like US tech stocks makes the drop much less surprising after a touch week of American markets. Its relation with Nasdaq 100 Index is again back at record levels.