The selloff in cryptocurrencies gained momentum on Monday, with Bitcoin tumbling to a six-month low and other digital tokens seeing even bigger losses.
Bitcoin sank as much as 6.6% and fell below the $34,000 mark, continuing a six-day downturn. Ether retreated 7.6% and touched $2,201, also the lowest since July.
Across the crypto spectrum, markets were in a sea of red with Solana’s SOL and Cardano’s ADA plummeting 19% and 13%, respectively, according to data compiled by CoinGecko.
Crypto has come under widespread selling pressure in recent days, with traders pointing to hawkish signals from the Federal Reserve and a selloff in technology shares as reasons for traders to withdraw from risky assets. Since its all-time high in November, Bitcoin has tumbled more than 50%.
“We don’t think it is a bad thing if market volatility takes some of the air out of the more speculative corners of the market,” said strategists led by Mark Haefele, chief investment officer at UBS Global Wealth Management.
The 40-day correlation coefficient for the digital token and the tech-heavy Nasdaq 100 has reached almost 0.66, the most in data compiled by Bloomberg since 2010. A similar correlation with the S&P 500 is at a record too.
Cryptocurrency-exposed stocks tumbled in premarket trading. MicroStrategy Inc. slumped about 12%, while Bitcoin miners Marathon Digital Holdings Inc. and Riot Blockchain Inc. dropped similar amounts.
Chris Weston, head of research with Pepperstone Financial Pty Ltd., said the sector is “grossly oversold but momentum is to the downside and rallies are likely to be sold.”
Peter Berezin, chief global strategist at BCA Research Inc., is skeptical about Bitcoin overall even as he sees the possibility of a short-term boost should stocks recover. His long-term target for it is just $5,000. Investors seeking to hedge risk should consider going long on Cardano, Solana and Polkadot versus Bitcoin, Litecoin, and Dogecoin, he said.