Cryptocurrency investors and mining companies experienced a tough day on Tuesday, as the value of their investments took a hit. Competing assets have been siphoning the value away from cryptocurrencies, causing pain in the market. Marathon Digital Holdings and TeraWulf were among the companies that experienced significant price drops, with Marathon falling over 14% and TeraWulf descending over 10%. Even coins and tokens weren’t spared, with Bitcoin Cash dropping nearly 8%.
One of the reasons for this decline is the rally of the 10-year Treasury note yield. After retreating from a 16-year high late last week, the yield has come roaring back, reaching over 4.8%. Treasuries are widely considered one of the safest investment options in the world, in contrast to cryptocurrencies which are still seen as risky assets. When the value of safer assets like Treasuries rises, demand for riskier investments weakens, leading to widespread declines in the crypto market.
Tuesday saw almost no major crypto investments in positive territory, as even Bitcoin and Ethereum were heading south. This means that Bitcoin Cash, Marathon, and TeraWulf were in good company in terms of experiencing declines.
In the crypto world, however, what goes down can come up just as quickly. Post-swoon rallies have happened numerous times before, leading to a recovery in prices. However, this may not occur immediately, especially if the Treasury yield remains elevated. Additionally, the Federal Reserve is prepared to raise interest rates again to combat inflation. Any sign of rising inflation could trigger a rate hike. Non-core consumer price index components, particularly gasoline, could see upticks in prices, which may affect the overall market.
Despite the market downturn, it’s important to note that writer Eric Volkman, who has positions in Bitcoin and Ethereum, believes that cryptocurrencies have the potential to recover. The Motley Fool also holds positions in and recommends Bitcoin and Ethereum, highlighting the continued support for these digital assets. It’s clear that the market remains volatile, and investors should carefully consider their investment strategies in light of the current conditions.
