Crypto Market Melts Down as Bitcoin Plunges 15% and Ethereum Plunges 14%

Bitcoin fell 15% in 24 hours today, falling below $40,000 for the first time since March 15. Meanwhile, Ethereum fell 14% to find itself below $3,000 for the first time since March 23.

It is part of a larger trend that has seen crypto markets plummet 8.5% in 24 hours, to hit a market cap of $1.84 trillion, according to CoinMarketCap.

If you are looking for plausible answers as to why, it is worth taking a look at the stock markets. The S&P 500, an index of the top 500 publicly traded companies in the US, ended down 1.7%, the Dow Jones Industrial Average closed 1.2% lower on Monday and the tech-heavy Nasdaq lost a whopping 2.2% of its value .

Bitcoin, which has historically been fairly correlated with other cryptocurrency prices, has recently become increasingly correlated with stock prices. In March, BTC’s price correlation with the S&P 500 hit 0.49, where -1 means they’re moving exactly in opposite directions, and 1 means they’re moving perfectly in sync. This was the highest rate since October 2020, according to Arcane Research.

But what’s going on with stock prices?

Make your choice. There’s the ongoing Russian war in Ukraine, a new round of COVID lockdowns in China, and of course the Federal Reserve’s decision to aggressively raise interest rates and curb the flow of funds into the economy.

The Nasdaq was already down almost 4% from Monday to Friday last week. The weekend didn’t do much better. As less money is pumped into the economy while the Fed tries to fight inflation, crypto market caps could very well decline, according to BitMEX founder Arthur Hayes. The billionaire investment banker and crypto entrepreneur wrote of a “coming crypto carnage” on Sunday and predicted that both Bitcoin and Ether would fall much further.

“Bitcoin and Ether will bottom out before the Fed acts and reverses policy from tight to loose,” he wrote. He predicted that they will test the $30,000 and $2,500 levels before the end of June.

Hayes previously predicted when the price of BTC was below $5,000 that it would hit $10,000 in 2019. That turned out to be prescient as the price surged above $12,000. A year earlier, he suggested that BTC could hit $50,000 this year, bottoming out between $3,000 and $5,000. While he was way off on the former, the latter prediction was correct.

Bitcoin bulls hope Hayes’ latest prediction is wrong. But a look at today’s price action suggests he may be on to something.