Cryptocurrencies slumped on Tuesday as bitcoin extended its recent slide and investors awaited the Federal Reserve’s next rate decision.
The price of bitcoin dropped more than 4% to $66,475, according to Coin Metrics, extending a decline that began Friday when bitcoin retreated from the $70,000 level.
Ether fell 6.1% to $3,452.02. Cryptocurrencies broadly, along with crypto-related equities, were in the red. Coinbase and MicroStrategy were each down more than 4%, while miners Marathon Digital and Riot Platforms both lost more than 2%.
Bitcoin losses may have been triggered by a wave of long liquidations, which forces traders to sell their assets at market price to settle their debts. In the past 24 hours, $56 million in long bitcoin liquidations have occurred across centralized exchanges, according to CoinGlass.
The market saw another $56 million in long bitcoin liquidations on Thursday, ahead of a better-than-expected May U.S. jobs report Friday. Bitcoin fell back under $70,000 after briefly testing the level to begin the month.
Like stock market investors, crypto traders worry that the Federal Reserve may not reduce interest rates this year. The central bank has kicked off its two-day policy meeting and is expected to give its decision on Wednesday. The Dow Jones Industrial Average lost 272 points on Tuesday, while the S&P 500 fell 0.3%.
“When equities sell off, other risk assets follow,” said Bartosz Lipiński, CEO of the crypto trading platform Cube.Exchange. “This feels largely like the market is losing confidence that the Federal Reserve will cut interest rates anytime soon … and greater fears about the impact of high rates over the long-term are beginning to take hold.”
“One look at options positioning shows long-term expectations are for a rally,” he added. “For now though, we may continue to see volatility until there is a clearer picture of the Fed’s plans for the remainder of the year.”
Lipiński also said the sell-offs on Tuesday and last Friday are further evidence of the ongoing “malaise” in the market.
“Despite spot ETH ETFs seemingly being on the verge of coming to the market in the U.S., there has been no real catalyst to drive prices higher,” he said. “Underlying fundamentals are strong for bitcoin, with supply being hoarded by ETFs, but sentiment has yet to catch up.”