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The price of Bitcoin and other cryptocurrencies fell in sympathy with tech stocks on Tuesday, indicating that investors' appetite for risk is shifting across the board.
The leading digital asset by market cap tested a two-week low of $62,000 as markets opened in the U.S., showing a 4% decrease over the past day, according to CoinGecko data. Ethereum, XRP, and Solana posted greater losses, with each falling at least 5% over the same period.
The retreat echoed signs of pressure on Wall Street. The tech-heavy Nasdaq was on track to slide 1.6%, weighed down by chipmakers including Micron Technology and SanDisk. Indexes in South Korea and Japan had fallen earlier, with losses led by other tech-boom names.
Despite rising on Tuesday, SpaceX shares dropped 12% to $156.40 a day before, denting a post-debut pop for Elon Musk's rocket-maker and AI firm, according to Yahoo Finance. The firm's stock price had risen to $158, with its market cap hovering around $2 trillion.
"We're seeing a bit of a sell-off in AI," Carlos Guzman, vice president of research at crypto trading firm GSR, told Decrypt. "Crypto is reacting to that risk-off sentiment."
Investors now appear to be digesting a firming consensus around rate hikes, Guzman said, following a stretch of gains for tech stocks that had been resilient despite geopolitical tensions in the Middle East that stoked heightened macroeconomic uncertainty.
The drop also follows Kevin Warsh's first remarks as Federal Reserve chair, in which he signaled last week that the U.S. central bank would shift its focus away from providing markets with forward guidance, while underscoring its dedication to taming inflation.
With traders now expecting the Fed to raise its benchmark rate to a target range of 3.75% to 4% in July, Bitcoin is likely to continue trading between $60,000 and $70,000, Gerry O'Shea, head of global market insights at crypto asset manager Hashdex, told Decrypt.
"If people think that we're going into a hawkish environment, that can certainly hurt near-term prices for crypto and other risk assets," he said. "It's a challenging environment that people are trying to make sense of in terms of what the new Fed chair is going to be like."
In a Monday note, economists at Bank of America began projecting three hikes this year, lifting interest rates to a target range of 4.25% to 4.5% by year's end. Typically, higher rates weigh on risk assets, as the risk-free payouts on government debt become relatively attractive.
On Hyperliquid, positioning has nonetheless become "progressively more bullish," Glassnode tweeted on Tuesday, citing an uptick in optimistic Bitcoin bets.
Although crypto prices have proved tepid for months, O'Shea argued that there are two catalysts that could jumpstart the market this year. He pointed to further de-escalation in light of a memorandum of understanding between the U.S. and Iran, as well as the Clarity Act.
Still, time is ticking for lawmakers to pass the sweeping bill that would bring further legitimacy to the crypto industry, while establishing jurisdictional boundaries between regulators, before their focus is consumed by fast-approaching midterm elections in November.
Lawmakers have tried to iron out the legislation for months. But if the Clarity Act doesn't pass by August, advocates argue the prospect of its prospects will sink indefinitely below the horizon.
