On Monday, the most popular cryptocurrency, bitcoin (BTC), dropped below the USD 40,000 level for the first time since August 2021, while ethereum (ETH) dived below USD 3,000 for the first time since October. However, the dip was short-lived as both top cryptoassets rebounded sharply soon after.

BTC slipped below USD 39,700, before moving back above USD 40,800, while ETH tested USD 2,920 and rallied above the USD 3,000 level again.

At 15:06 UTC, BTC is still down 2% in a day, while ETH lost 3% of its value.

As the selloff in the market accelerated, over USD 155m worth of crypto derivative positions were liquidated, or almost half of all liquidations in the past 24 hours, per Coinglass data.

Other major cryptoassets from the top 10 club are down 3%-6% in a day.

“Despite the crypto market being in oversold territory, it is widely impacted by global markets and economic conditions. Plans declared by the Federal Reserve for rate hikes in 2022, as well as reducing the rate of monthly bond purchases, have contributed to bitcoin’s selloff so far,” Marcus Sotiriou, Analyst at the UK based digital asset broker GlobalBlock, wrote in an emailed note.

Meanwhile, on Wednesday, US inflation data will be released.

“The market expects the consumer price index (CPI) to rise 7.1% for the year through December and 0.4% over the month. If the figure released is larger than expected we can expect further sell pressure for bitcoin, as the markets are forward-looking and high inflation leads to more action from the Federal Reserve to control it,” Sotiriou said, adding that the downside is limited in the short term, even with higher-than-expected inflation data on Wednesday.