The crypto market capitalization hovers over $900 billion
Crypto market speculators are not showing much optimism ahead of the Federal Reserve’s interest rate decision this week.
Following August’s worse-than-expected US inflation data and the completion of Ethereum’s major software transition last week, the total market cap of cryptoassets sold off by 15% in the past week from $1.07 trillion to $913 billion early Monday.
The market cap now hangs at $927 billion, according to Coinmarketcap, ahead of Wednesday’s Fed meeting where policymakers are expected to deliver the third 75-basis-point hike of the year to combat ongoing prices.
“Everyone in crypto is now a macro analyst,” Martin Leinweber, a former fixed-income portfolio manager and current crypto strategist at indexing firm MarketVector, told Yahoo Finance. “Everybody looks at what [Fed Chair] Jay Powell says and follows the futures rates for the nascent fund.”
Bitcoin fell as low as $18,469 early Monday, but is now trading at $19,115, down 14% in the past week.
Since the Merge upgrade ended early Thursday morning, ether has fallen 22% and is changing hands at $1,343 apiece by mid-Monday.
Based on crypto’s total market capitalization, ether has lost as much as 2.5% of its share and currently accounts for 17.8% of crypto’s total value, down from last Tuesday’s peak of 21%. Bitcoin’s share has remained roughly unchanged over the same period.
Bitcoin’s correlation with stocks and bonds, which reversed course over the summer, is rising again, according to data from crypto analytics firm Kaiko.
“Inflation uncertainty combined with Fed tightening has resulted in a historic decline in both risk and fixed income assets, challenging traditional approaches to asset allocation,” Kaiko’s team wrote Monday.
So far this year, bitcoin has sold 59%, slightly better than ether (-63%). Meanwhile, the NASDAQ and S&P 500 have sold off by 27% and 19%, respectively. iShares Aggregate Bonds ETF (AAG), which tracks the US investment-grade bond market, has fallen 13% so far this year.
To escape downside volatility, crypto investors have rotated back to stablecoins with the cumulative market share of the three major stablecoins – Tether, Circle’s USD coin and crypto exchange Binance’s BUSD – up 2% since this time last week.
The other major uncertainty for crypto’s remaining 2022 is regulation, according to Nico Cordeiro, CIO of quantum crypto fund Strix Leviathan.
“That’s the big unknown, and it seems like the SEC has gotten a lot more aggressive in policing the space,” Cordeiro told Yahoo Finance.
Last week during a congressional hearing, Securities and Exchange Commission Chairman Gary Gensler said that crypto efforts could trigger securities laws. The next day, the US Treasury issued a wide range of reports calling on both the SEC and CFTC to crack down on the crypto sector.
“Like all hedge funds, we spend a lot of money on lawyers and there’s just a lot of gray area,” Cordeiro said. “Really anything that gets passed through Congress can be cleaned up.”
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David Hollerith is a senior reporter at Yahoo Finance covering cryptocurrency and stock markets. Follow him on Twitter at @DsHollers
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