It was short-lived – the excitement that followed Bitcoin’s all-time-high in November. The cryptocurrency’s Bull Run that saw bitcoin came close to $70,000 ended prematurely and ushered in a down-spiraling market trend that has ignited mourning among investors.

Bitcoin dropped below $36,000 on Saturday, with altcoins also lowering their gains to more than half, the lowest since July. The recent market plunge affecting riskier assets is attributed to the Federal Reserve intending to withdraw stimulus from the market.

Bitcoin touched $68,000 in November, but has lost over 45% of its value since then. Bespoke Investment Group said the decline, which has wiped off $600 billion in bitcoin’s market value, and over $1 trillion in the aggregate crypto market value, is the second-largest ever decline in dollar terms for both.

“It gives an idea of the scale of value destruction that percentage declines can mask,” wrote Bespoke analysts in a note. “Crypto is, of course, vulnerable to these sorts of selloffs given its naturally higher volatility historically, but given how large market caps have gotten, the volatility is worth thinking about both in raw dollar terms as well as in percentage terms.”

Bloomberg pointed out the impact of Fed’s moves on both stocks and cryptocurrencies, marking striking correlation.

With the Fed’s intentions rocking both cryptocurrencies and stocks, a dominant theme has emerged in the digital-asset space: cryptos have twisted and turned in nearly exactly the same way as equities have.

“Crypto is reacting to the same kind of dynamics that are weighing on risk-assets globally,” said Stephane Ouellette, chief executive and co-founder of institutional crypto-platform FRNT Financial. “Unfortunately for some of the mature projects like BTC, there is so much cross-correlation within the crypto asset class it’s almost a certainty that it falls, at least temporarily, in a broader alt-coin valuation contraction.”

Crypto-centric stocks also dropped on Friday, with Coinbase Global Inc. at one point losing nearly 16% and falling to its lowest level since its public debut in the spring of 2021, Bloomberg data show.

MicroStrategy Inc. tumbled 18% while the Securities and Exchange Commission said the company can’t strip out Bitcoin’s wild swings from the unofficial accounting measures it touts to investors. The enterprise software company’s pile of Bitcoin has effectively made its shares a proxy for the digital asset.

Meanwhile, the Biden administration is preparing to release an initial government-wide strategy for digital assets as soon as next month and task federal agencies with assessing the risks and opportunities that they pose, according to people familiar with the matter.

Antoni Trenchev, Nexo co-founder and managing partner, cites Bitcoin’s correlation to the tech-heavy Nasdaq 100, which right now is near the highest in a decade.

“Bitcoin is being battered by a wave of risk-off sentiment. For further cues, keep an eye on traditional markets,” he said. “Fear and unease among investors is palpable.”

Take also the correlation between Bitcoin and Cathie Wood’s ARK Innovation ETF (ticker ARKK), a pandemic poster-child of speculative risk-taking. That correlation stands at around 60% year-to-date, versus about 14% for the price of gold, according to Katie Stockton, founder and managing partner of Fairlead Strategies, a research firm focused on technical analysis. It’s “reminding us to categorize Bitcoin and altcoins as risk assets rather than safe havens,” she said.

Meanwhile, more than 239,000 traders had their positions closed over the past 24 hours, with liquidations totaling roughly $874 million, according to data from Coinglass, a cryptocurrency futures trading and information platform.

Though liquidations have spiked, the numbers are relatively muted when compared to previous declines, according to Noelle Acheson, head of market insights at Genesis Global Trading. Acheson points out that Bitcoin’s one-week skew, which compares the cost of bearish options to bullish ones, spiked to almost 15% on Wednesday compared to an average of about 6% in the past seven days.

“This flagged a jump in bearish sentiment, in line with overall market jitters given the current macro uncertainty,” she said.

Kara Murphy, chief investment officer at Kestra Investment Management, said cryptocurrencies have a life of their own but that the recent slump is rational.

“It makes sense as people start to retrench a little bit, look for something that’s a little bit more solid, they’re gonna move away from crypto,” she said. “On the margin, with folks becoming more risk averse, crypto will suffer from that.”

In the latest government’s threat to the crypto market that suggestively contributed to its current plunge that has put the market capitalization at below 40%, the lowest since July, Russia is wielding the amour.

Russia’s central bank on Thursday proposed banning the use and mining of cryptocurrencies on Russian territory, citing threats to financial stability, citizens’ wellbeing and its monetary policy sovereignty. The report was first made by Reuters.

The move is the latest in a global cryptocurrency crackdown as governments from Asia to the United States worry that privately operated and highly volatile digital currencies could undermine their control of financial and monetary systems.

Russia has argued for years against cryptocurrencies, saying they could be used in money laundering or to finance terrorism. It eventually gave them legal status in 2020 but banned their use as a means of payment.

In a report published on Thursday, the central bank said speculative demand primarily determined cryptocurrencies’ rapid growth and that they carried characteristics of a financial pyramid, warning of potential bubbles in the market, threatening financial stability and citizens.

The bank proposed preventing financial institutions from carrying out any operations with cryptocurrencies and said mechanisms should be developed to block transactions aimed at buying or selling cryptocurrencies for fiat currencies.

The proposed ban includes crypto exchanges. Cryptocurrency exchange Binance told Reuters it was committed to working with regulators and hoped the report’s release would spawn dialogue with the central bank on protecting the interests of Russian crypto users.

Restrictions on owning cryptocurrency are not envisaged, said Elizaveta Danilova, head of the central bank’s financial stability department.

Active cryptocurrency users, Russians have an annual transaction volume of about $5 billion, the bank said.

Shadowing China?

The central bank said it would work with regulators in countries where crypto exchanges are registered to collect information about the operations of Russian clients. It pointed to steps taken in other countries, such as China, to curb cryptocurrency activity.

In September, China intensified its crackdown on cryptocurrencies with a blanket ban on all crypto transactions and mining, hitting bitcoin and other major coins and pressuring crypto and blockchain-related stocks.

“For now there are no plans to ban cryptocurrencies similar to the experience of China,” Danilova said. “The approach we have proposed will suffice.”

Joseph Edwards, head of financial strategy at crypto firm Solrise Group, played down the report’s significance, saying no one outside Russia would be losing sleep over it.

“Moscow, like Beijing, is always rattling its saber over ‘crypto bans’, but Russia has never been a pillar of any facet of the industry in the same way as China has been at times,” he said.

Crypto mining

Russia is the world’s third-largest player in bitcoin mining, behind the United States and Kazakhstan, though the latter may see a miner exodus over fears of tightening regulation following unrest earlier this month.

The Bank of Russia said crypto mining created problems for energy consumption. Bitcoin and other cryptocurrencies are “mined” by powerful computers that compete against others hooked up to a global network to solve complex mathematical puzzles. The process guzzles electricity and is often powered by fossil fuels.

“The best solution is to introduce a ban on cryptocurrency mining in Russia,” the bank said.

In August, Russia accounted for 11.2% of the global “hashrate” – crypto jargon for the amount of computing power being used by computers connected to the bitcoin network.

Moscow-based BitRiver, which operates data centers in Siberia hosting bitcoin miners, said it did not consider a complete crypto ban likely, expecting a balanced position to develop once different ministries have discussed the proposals.

The central bank, which is planning to issue its own digital rouble, said crypto assets becoming widespread would limit the sovereignty of monetary policy, with higher interest rates needed to contain inflation.

Bitcoin fell to $36,000 on Friday, wiping off billions of dollars in investors’ funds, and heightening concern over volatility that has been a major obstacle for cryptocurrency adoption. Russia’s proposed ban, if approved, will mean further harm to the already troubled crypto industry.