Ethereum Drops from All-Time High, Bitcoin Slides Below $55k
Ethereum briefly trades above $4,200 before skittering down to the current price of $3,900. Bitcoin loses momentum, trading below $55k.
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- Ethereum briefly trades above $4,200 before skittering down to the current price of $3,900
- Bitcoin loses the buying momentum, slides 8.5% so far in the week
Cryptocurrency market sell-off resulted in a significant drop in the leading crypto assets’ valuations on Monday. The price of Bitcoin retreated to levels below $55,000 after it climbed above the two-week resistance of $58,000. The world’s biggest digital coin dropped over 8.5% to start the week, sliding from Monday’s intraday high of $59,500 to the current market price of $55,100. Earlier today, the price of Bitcoin reached a daily low of $54,400.
Ether, the second-largest crypto-asset running on the Ethereum network, pulled back from its record high yesterday. The token broke above $4,200 per coin on Monday before buyers lost the upside momentum and the price eased off the highs. Ether closed the day in negative territory, snapping a winning streak of 15 consecutive days that saw the price increase by 94%.
Recently, Bitcoin’s market dominance has been shrinking, going from 70% at the start of the year to a three-year low of 42% this week. Bitcoin’s market value now sits slightly above $1tn in a $2.4tn crypto market valuation.
Alternative coins, or altcoins, are in fashion currently as market participants witness parabolic jumps in Ether, Dogecoin, and other cryptos that outperform bitcoin but also pose questions about the speculative nature of the recent altcoin rally. For example, the stratospheric rise of Dogecoin has pushed the price of the asset higher by 26,000% in the past six months, far outshining any other return in any asset class for the same period.
Inflation Bolsters Bitcoin’s Value?
Yesterday’s drop, according to some analysts, could be a result of the stock market meltdown that kicked off the week. Stock market investors on Monday were largely concerned about renewed inflation pressures and that led the market lower, causing the Nasdaq Composite to close 2.5% to the downside. Tech shares dragged down the equity market as they are the ones most likely to be hurt by rising prices because the value of their future earnings will be worthless.
Moreover, the Federal Reserve could be forced to taper its asset purchases so that the economy could cool down. Investors fear that the central bank could also decide to raise interest rates which could jeopardize the lofty valuations of high-flying tech companies.
The uncertainty over inflation and interest rates on Monday caused stock market jitters that could have ricocheted to the cryptocurrency market, knocking off bitcoin’s rise. Crypto advocates point to bitcoin’s hedge-against-inflation attributes, saying that in a rising interest rate environment and a falling stock market, the digital asset would preserve its value.
On that note, a number of studies reveal the rising correlation between bitcoin and the stock market. As stocks were jolted yesterday, bitcoin also followed with its depreciation, countering the narrative that the cryptocurrency acts as a haven. In the long-term, both the stock market and bitcoin suffered a heavy blow
during the turbulent times at the start of the pandemic. Since March last year, both asset classes have been moving to the upside, so far confirming the consistency of the positive correlation.