The significant collapse of a large speculative bubble in memecoins this January appeared to be a sufficient reason for the recent downturn in the broader cryptocurrency market.
This week, however, the declines have escalated noticeably, partly driven by an increasing risk-averse sentiment in the previously optimistic stock market.
Approximately 45 minutes before the market closed on Thursday, the Nasdaq was down over 2%, reflecting a decline of about 7% over the past several sessions. Today’s losses are predominantly led by chipmakers in the wake of Nvidia’s (NVDA) fourth quarter earnings report released last night, with NVDA seeing a 5% drop.
The stock selloff occurs as many leading companies are grappling with high valuations after seemingly months of unrestrained growth. Adding to the tension are President Trump’s ongoing tariff threats, the latest being punitive tariffs targeting Mexico, Canada, and China beginning Tuesday, which set the stage for the current market correction.
“Extreme caution is necessary when it comes to risk assets,” remarked Quinn Thompson, founder of Lekker Capital. “Inflation data is coming in alarmingly high, making it unlikely for the Fed to cut rates in the near future. Additionally, long-term inflation expectations are rising (this is a significant warning sign), and it appears U.S. economic data is suggesting that the so-called ‘Trump bump’ was merely a temporary rebound.”
Regarding the cryptocurrency market, Thompson pulls no punches: “Every conceivable positive news item has been released with little to no effect on pushing prices higher,” he stated. “Investors seem to have forgotten the reality of bear markets and what they entail.” He predicts bitcoin will target the $70,000 range by the end of March.
