Cryptocurrency markets experienced a broad-based selloff on Tuesday, mirroring weakness in U.S. Equities and a correction in precious metals, with Bitcoin falling to around $68,000. The downturn signals a shift in investor sentiment, as risk aversion increases and correlations between asset classes evolve.
Bitcoin’s price decreased by 1.25% since midnight UTC, trading at , while Nasdaq futures and gold declined by 0.55% and 2.4% respectively over the same period. This movement underscores a tightening relationship between Bitcoin and the tech-heavy Nasdaq index, a correlation that has recently strengthened.
The correlation between Bitcoin and the Nasdaq has swung dramatically in recent weeks, moving from a negative correlation of -0.68 on , to a positive correlation of +0.72. This indicates that Bitcoin is increasingly behaving like a risk asset, moving in tandem with tech stocks rather than acting as a hedge against broader market volatility.
Altcoins also felt the pressure, with memecoins PEPE, DOGE, and TRUMP leading the losses, shedding between 3.5% and 4.5% of their value. However, some altcoins bucked the trend, with MORPHO gaining 23.5% and Zcash (ZEC) rising 19% over the past week, suggesting selective buying interest in specific projects.
The broader tech selloff is attributed to growing concerns surrounding artificial intelligence and its potential disruptive impact on various industries. This anxiety appears to be spilling over into the cryptocurrency market, as investors reassess their risk exposure.
The weakness in the crypto market is also reflected in derivatives data. Open interest in crypto futures has continued to decline, falling by 1.5% to $93 billion within 24 hours, reaching a multi-month low. A total of $229 billion in leveraged positions were liquidated over the same period, with long positions accounting for the majority of the liquidations.
Open interest in DOGE futures saw a 4% decrease, leading the decline among major cryptocurrencies. PEPE, LINK, and AVAX also experienced declines in open interest ranging from 3% to 5%. Notably, open interest in futures tied to HYPE, a recent outperformer, fell to 44.45 million HYPE, the lowest level since early December, likely reflecting profit-taking after the token outperformed Bitcoin and other majors during the recent market downturn.
Despite the market downturn, panic appears to be subsiding, as evidenced by a decrease in implied volatility indices for both Bitcoin and Ether from their monthly highs. However, put options for Bitcoin and Ether continue to trade at a premium compared to call options on Deribit, indicating persistent downward sentiment, although positioning is less defensively skewed than it was two weeks prior.
Bitcoin dominance, the percentage of the total cryptocurrency market capitalization represented by Bitcoin, has been fluctuating between 57.4% and 60.1% since . This suggests that while Bitcoin is currently leading the decline, the broader altcoin market is also experiencing weakness.
Gold, often considered a safe-haven asset, is also under pressure, currently trading at $4,928 after failing to establish support above $5,000. The precious metal reached a record high of $5,600 on , before undergoing a significant correction, losing 21.5% of its value in the subsequent four days.
The current market conditions highlight the interconnectedness of global financial markets and the growing influence of macroeconomic factors on the cryptocurrency space. The shift in Bitcoin’s correlation with the Nasdaq suggests that it is increasingly being viewed as a risk asset, subject to the same forces that drive traditional markets. Investors are closely monitoring these developments as they navigate the evolving landscape of digital assets.
