Crypto markets lost some 12% in the past 24 hours amid a weak macroeconomic sentiment and systemic risk from within to reach market capitalization levels last seen in January 2021.
Bitcoin (BTC) slid 13% to under $25,000 to its lowest in over 18 months while Ether (ETH) lost 18%. Dogecoin (DOGE) fell some 21%, while Solana’s SOL, Polkadot’s DOT, and XRP fell at least 16% in the past 24 hours.
The top hundred cryptocurrencies by market capitalization recorded average losses of 15%, data shows. Despite the drop, crypto futures recorded only $1 billion in liquidations—a relatively lower figure compared to previously high liquidations when prices did not move as much. This suggests that the plunge was led by spot selling.
Weakness in cryptocurrencies came amid poor U.S. Consumer price index data for May released last week.
Inflation surged to over 8.3% over the past year, the report said, causing traders to price in further rate hikes of over 175 basis points by September, implying two half-point and one 75 basis points hike, as per Bloomberg.
Such analysis led to a rout in global assets on Monday, with Asian stock indexes ending the day over 3.39% lower. Europe’s Stoxx 600 fell 2.20% since Monday’s start, and Germany’s DAX lost 2.18%. Futures in the U.S. Opened lower. Technology-heavy Nasdaq 100 sunk 2.95% since Monday’s open, while the S&P 500 fell 2.33%.
Severe losses ahead
Traders said they expect crypto prices to continue to fall until market conditions improve.
“We could be facing even more severe losses moving forward. Economic growth is clearly slowing, and reports already suggest the U.S. Could see a recession in the next year,” said Manuel Ortiz-Olave, cofounder at equity tokens firm Brickken, in an email to CoinDesk. “Higher inflation will continue forcing higher interest rates, and higher interest rates are also negative for economic growth.
“Some of the most important companies in the world like Apple, Microsoft, or Nike have already reported slowdowns in sales, and Tesla has indicated that layoffs will come soon. These are clearly negative headlines, which combined with higher food and fuel prices, make people be careful about their savings,” Ortiz-Olave said, explaining a slowdown in consumer spending would lead to a loss of revenue for major companies.
Meanwhile, possible systemic risk from within the crypto space contributed to the falling sentiment as crypto lender Celsius paused withdrawals.
The company allows users to earn yields of over 17% on their crypto holdings and cited “extreme market conditions” as one of the factors behind its decision. This led to severe criticism among market observers on crypto Twitter.
Elsewhere, a decentralized autonomous organization (DAO) dedicated to the Tron ecosystem deployed $2 billion in funding to protect against a possible fall in the prices of its TRX tokens.
“Funding rate of shorting #TRX on binance is negative 500% APR. Trondaoreserve will deploy 2 billion USD to fight them,” Tron founder Justin Sun tweeted. “Short squeeze is coming.”
Monday’s drop seemed to stabilize with Bitcoin trading just about the $24,100 mark at writing time.