- The cryptocurrency market shrunk more than 2% over the past 24 hours, alongside a selloff in stocks.
- The bigger coins were down on Wednesday, with ether down over 3%, threatening to break $3,000.
- So-called "ethereum killers" cardano and avalanche saw the previous week's gains all but wiped out.
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Cryptocurrency prices were down on Wednesday, as the overall market declined more than 2% in value, pushing the total capitalization below $2 trillion, as a wave of risk aversion swept across the investment landscape, in light of surging bond yields and rising inflation expectations.
The global crypto market is now worth around $1.95 trillion, having peaked at close to $3 trillion in mid-November, according to CoinMarketCap.
This dip comes after US Treasury yields hit two-year highs, which also caused stocks to sink. This has been a common theme so far in 2022, as the Federal Reserve repeatedly signals that it could hike US rates several times throughout the year. Higher rates tend to weigh on more speculative assets, as investors are more likely to put their cash into areas of the market that they perceive to be less risky.
This correlation is supported by Arcane Research reports that link the S&P 500 to bitcoin.
"Currently, the S&P 500 seems to dictate the direction of bitcoin and the overall crypto market, evident by correlations reaching new highs. Bitcoin's 90-day correlation to the S&P 500 is currently at its highest since October 2020," the company said in a note.
Bitcoin fell more than 1% to $41,471, while ethereum's ether token suffered heavier losses of more than 3%, falling to $3,070 and threatening to dip below that $3,000 mark for the first time since September.
Altcoins suffered more severely as cardano dropped 8% to $1.38 and avalanche dropped 5% seeing it sit at $82.31 at the time of writing.
Several altcoins had logged significant gains last week as capital flooded into NFT and DeFi projects built on alternative smart-contract platforms to ethereum. The so-called 'ethereum killers' have made impressive gains over the past year.
JPMorgan reported that ethereum's dominance in the NFT space had gone from 95% at the beginning of 2021 to around 80%. In particular, cardano's ada token had seen significant gains over the past 10 days, as it was up over 30% at one point according to data from CoinMarketCap.
The altcoin founded by ethereum co-founder Charles Hoskinson is one of 4 cryptocurrencies considered by some analysts to be a major threat to ethereum as it is "more scalable." However, the budding crypto is still some way off all-time highs of $3.10 from September 2021.