Bitcoin has dropped more than 50% from its all-time high as the cryptocurrency market continues to fall
Bitcoin has dropped more than 50% from its all-time high as the cryptocurrency market continues to fall

After tumbling again over the weekend, the world's most valuable cryptocurrency was down 10% on Monday. The price of bitcoin has dropped over 20% in the last week. Bitcoin is trading for just under $31,000, down more than 50% from its late-year peak of approximately $69,000 and at its lowest level since July 2021.

Altcoins, or alternative cryptocurrencies, have also been severely damaged. In the last week, Ethereum, Binance, Solana, and Cardano have all dropped 15%, while Elon Musk's pet dogecoin has dropped 10%.

Cryptocurrencies are showing to be just as risky as stocks, and they are susceptible to the same problems that are causing the Dow, S&P 500, and Nasdaq to fall.

"Volatile trading in digital products was not that uncommon in previous years," said Michael Kamerman, CEO of trading software Skilling. "During market turmoil, capital and investment regard cryptocurrencies and technology firms as risk assets, fleeing to safer market corners."

For the long haul, Kamerman is enthusiastic about bitcoin. Crypto is attracting the attention of more hedge funds and other large institutions, as well as several global central banks.

"Bitcoin is not impervious to global higher inflation that are affecting most other asset classes," he did add. As a result, we should expect the declining trend to continue."

Bitcoin is suffering from the same issues that are pushing stocks down.

Fears of inflation, concerns about large Federal Reserve interest rate hikes, and concerns about a likely economic recession have shaken Wall Street and pushed bond yields surging.

The 10-year Treasury bond yield has more than quadrupled this year, sitting slightly above 3.1 percent. Bond yields have reached their highest level since November 2018.

The rise in yields has also aided the dollar's value, which tends to climb in lockstep with interest rates. The US Dollar Index is currently nearing its best level in nearly two decades. That's terrible news for bitcoin, as many crypto supporters see a weakening dollar as a positive indicator for digital currencies.

Some crypto sceptics believe the selling in bitcoin has only just begun as rates (and the dollar) continue to rise. The Federal Reserve is beginning to reduce monthly bond purchases and other forms of stimulus, which might be bad news for speculative assets in general.

"The Fed's tremendous reversal of liquidity will shatter the pandemic era bubble in crypto currencies, money-losing tech businesses, and meme stocks," said Jay Hatfield, CEO of Infrastructure Wealth Management and manager of the InfraCap Equity Income ETF.

Bitcoin, according to Hatfield, might go as low as $20,000 by the end of the year.

Several stocks with bitcoin exposure are also in the red. Coinbase, a cryptocurrency exchange, fell 17% on Monday, and is down more than 65% this year. In 2022, the stock of Robinhood, which also allows users to buy and sell various cryptocurrencies, has dropped by more than 45 percent.

Shares in a number of cryptocurrency miners, which run servers that solve the complicated mathematical riddles required to generate new bitcoin and other cryptos, have also plummeted. This year, Hive Blockchain (HVBTF), Marathon Digital Holdings (MARA), and Riot Blockchain (RIOT) have all dropped between 50% and 60%.

Another evidence of the market's sudden shift in mood this year is the big decline in these and other momentum tech firms. The CNN Business Fear & Greed Index is in Extreme Fear zone, based on seven indices of market emotion.

Safe havens like dividend-paying blue chip equities may continue to outperform speculative cryptos.

Tammy Da Costa, a DailyFX analyst, indicated in a study that traders are "more hesitant to take the increased risk associated with the crypto realm."

"The future of individual coins or tokens remains uncertain," she continued, adding that "interest rate hikes are likely to endanger the short-term possibility for profits" in bitcoin, ethereum, and other established cryptos.