Huge Sell-Off Wipes $200 Billion From Crypto Market in One Day

Over $200 billion was wiped from the crypto market in just one day after a cryptocurrency sell-off, price tracking platform CoinMarketCap reported.

The huge loss came amid a crypto market slump that hit major coins after TerraUSD, a stablecoin that fell below its 1:1 parity with the dollar, collapsed.

The first cryptocurrency, Bitcoin, suffered a 10% drop to $25,401.05 in the last 24 hours, reaching its lowest level since December 2020. So far this year, Bitcoin is down more than 45%, losing nearly two-thirds in value after an all-time high of $69,000 in November 2021.

The second-largest digital currency by market capitalization, Ethereum, fell 16%, losing almost half of its value in 2022 alone.

Meanwhile, crypto-related stocks in Asia also tumbled, suggesting that the market crash could also be seen today. The firm behind the TradeStation and Coincheck markets, Japan’s Monex Group Inc., posted a 10% drop.

Also, Hong Kong-listed fintech firm BC Technology Group Ltd. closed down 6.7% on Wednesday, Bloomberg reported.

Experts explain that cryptocurrencies have succumbed to selling pressure induced by a sell-off in risky assets as global central banks take aggressive action and tighten monetary policy to combat inflation.

The 100-day correlation coefficient for Bitcoin and the S&P 500 stands at 0.33, among the highest readings for 2022, meaning assets are moving in unison. In other words, Bitcoin tends to go down when stocks go down and vice versa.

On Thursday, S&P 500 futures lost 0.8% after the MSCI Asia Pacific index plunged.

It’s not the first time cryptocurrency investors have seen such wild market swings. Also, crypto giants Bitcoin managed to cut losses quickly to trade down 4.2%, while Ethereum adjusted down 9% shortly before 5:00 p.m. Hongkong time.

However, strategists believe the market’s rout may lead to a widespread reduction of retail investors in risky assets or motivate small traders to sell their assets after their crypto losses.

Nikolaos Panigirtzoglou, a global market strategist at JPMorgan Chase & Co, told Bloomberg: “Contagion here is not via linkages between the crypto ecosystem and the traditional financial system, but via retail investors sentiment.”