“Buy the dip!” BTC is done dipping? proponents will tell you. But how do you know when
Bitcoin’s market cap dominance—meaning the percentage of the overall crypto market’s value it’s responsible for—is down to just over 37%, its lowest rate since 2018. But that doesn’t mean it’s the only crypto asset having a chilly start to January. Elsewhere in the top 10, lost nearly 8% of its value on Wednesday, Terra was rocked for 9% losses, and got burned by 10%. Overall, the cryptocurrency market cap is down over 6% to $2.2 trillion. The last time it fell below $2 trillion was September 2021.
It’s not just crypto that’s having a bumpy hump day. U.S. equities were also down today after the Federal Reserve indicated it could move up its timetable for raising interest rates to mid-March. Minutes from the mid-December meeting of the Federal Open Market Committee, released today, showed that some officials want to follow that interest rate increase by jettisoning some of the nearly $8.8 trillion in bonds it’s holding. In short: The Fed is going to stop printing money and make it more expensive to borrow in order to steady the economy and keep rising inflation in check.
Stock traders took note. The Dow Jones Industrial Average closed down nearly 1% today after setting a record yesterday. Nasdaq witnessed an even steeper drop, losing 3.3%.
That’s important as Bitcoin’s price became increasingly correlated to stock prices throughout 2021, reaching some of its highest levels in December. According to Bloomberg, as of December 3, the 100-day correlation coefficient between the cryptocurrency and the S&P 500 was 0.33, where 1 means they always move together and -1 means they are completely divergent.
Other casual crypto observers have pointed to widespread internet outages in Kazakhstan as a reason for the price drop, as that country has the second-largest rates of Bitcoin mining after the U.S. But a drop in hashrate by Bitcoin mining rigs going offline wouldn’t equate to a price drop on its own, Will Foxley of Compass Mining told Decrypt.
Still, it’s possible that traders are responding to the overall disruption to the crypto economy in Kazakhstan and elsewhere. High fuel prices in the country led to popular demonstrations and the resignation of the prime minister. Elsewhere in Eurasia, Kosovo this week banned Bitcoin mining to deal with electricity shortages, mirroring temporary steps taken by Iran at the end of December.
And you know what Freak Nasty says: “When you dip, I dip, we dip.”
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