Bitcoin is in free fall.
The largest cryptocurrency plunged as low as $30,527 on Monday, according to CoinGecko. That’s down 50% from its November all-time high of $69,000.
Ether, the second-largest cryptocurrency, is trading at around $2,316, down 9% within the past day and 18% in the past week. The greater cryptocurrency market is in the red as well, dropping more than 9% in the past 24 hours and shedding $1.6 trillion in market value since November.
It comes against the backdrop of traditional markets taking a hit. On Monday, the Dow Jones industrial average dropped 653 points, while the S&P 500 fell 3.2%, tumbling below the 4000 level for the first time in over a year, and the Nasdaq composite fell 4.2%.
Tech stocks and Bitcoin have moved in tandem throughout the last week especially.
Analysts tell Fortune that Bitcoin flirting with the $30,000 level is cause for concern. In fact, “below $20,000 is mordor,” Meltem Demirors, chief strategy officer at CoinShares, a digital asset investment firm, tweeted on Monday, conjuring up the dreaded land of villainy from J.R.R. Tolkien’s The Lord of the Rings. But even below $30,000, she clarified, is “goblintown.”
So, how likely is it that Bitcoin heads to “Mordor”?
Bitcoin blues
The Bitcoin and stock market nosedive began after the Federal Reserve indicated it would raise interest rates by half a percentage point on Thursday. “What’s bad for stocks is bad for Bitcoin right now,” Michael Safai, managing partner at Dexterity Capital, a quantitative trading firm focused on cryptocurrency, told Fortune.
The current “market meltdown” isn’t specific to crypto assets or any asset class, Ming Wu, CEO of decentralized interest rates exchange Strips Finance, told Fortune.
“The stock market just had its worst start to the year since 1939. Bonds haven’t been crushed this badly since just after World War I,” he said, adding that the “majority of tech is down well over 60% and many [are] down 80% plus.”
Along with the current macro environment, Safai said, the depegging of Terra’s UST stablecoin also added “downward pressure” on Bitcoin and the overall cryptocurrency market, as once the stablecoin lost its U.S. dollar peg, UST developers were “pushed” to sell its Bitcoin, Ether, and Luna, the cryptocurrency tied to Terra, to “meet redemption requests.”
“It’s not as significant as a money-market fund ‘breaking the buck,’” he said, referring to a famous turning point in the great financial crisis of 2008, “but it is adding to this lingering anxiety among crypto investors. The longer it lasts, the more that it will increase pressure on Bitcoin, Ethereum, and Terra’s Luna token, which has sold off more than the markets.”
If the downturn persists, and Bitcoin falls below $30,000, “the market will naturally be worried about the ripple effects, such as miners turning their machines off as they move out of profitability,” Safai said.
However, Wu said, movement below $30,000 is unlikely.
“If the 10-year starts to approach 3.5% and we get to true capitulation, that’s how you get to sub-$20,000 BTC,” he said. But “I’m not sure the nations these central banks inhabit can handle rates that high with their debt loads, so I remain optimistic we don’t actually get to that point.”
Bitcoin’s movement with stocks is a far cry from what Satoshi Nakamoto, the pseudonymous creator of Bitcoin, had in mind, Safai said, “but it’s the price being paid for cryptocurrencies becoming more intertwined with global finance.”
Sign up for the Fortune Features email list so you don’t miss our biggest features, exclusive interviews, and investigations.