Michael Novogratz, the billionaire cryptocurrency investor who leads Galaxy Digital Holdings Ltd., warned that he expects things to get worse before they get better.

“Crypto probably trades correlated to the Nasdaq until we hit a new equilibrium,” Novogratz said on Galaxy’s first-quarter earnings call on Monday. “My instinct is there’s some more damage to be done, and that will trade in a very choppy, volatile and difficult market for at least the next few quarters before people are getting some sense that we’re at an equilibrium.”

Tightening monetary policy to combat runaway inflation and ebbing liquidity are turning investors away from speculative assets across global markets. Adding to the caution around digital assets, the value of TerraUSD or UST, an algorithmic stablecoin that aims to maintain a one-to-one peg to the dollar, slid below $1 over the weekend before recovering.

“In light of fears of rising inflation, most investors have taken a risk-off approach — selling stocks and cryptos alike in order to cut down risk,” said Darshan Bathija, chief executive of Singapore-based crypto exchange Vauld.

Bitcoin Breaches Key Level; Do Kwon-Backed Stablecoin Slips

Monday’s selloff was widespread across the cryptocurrency universe, with Cardano falling 8.4% and Polkadot down 6.7%, data compiled by Bloomberg show.

Rising interest rates are giving individual and institutional investors pause for thought about the crypto market outlook, according to Edul Patel, chief executive officer of Mudrex, an algorithm-based crypto investment platform. Bitcoin’s 29% decline in 2022 compares with a retreat of more than 10% in global bonds and shares, and a 2.5% advance in gold.

“The downward trend is likely to continue for the next few days,” he said, adding Bitcoin could test the $30,000 level.

Bitcoin’s recent decline puts it at risk of firmly dropping out of the range where it’s been trading in 2022, completely reversing the most recent bull run that drove the token to a record of almost $69,000 in November. With its 40-day correlation with the S&P 500 stock benchmark at a record 0.82, according to data compiled by Bloomberg, any further hit to equities sentiment would risk dragging Bitcoin down as well.

A correlation of 1 means two assets move in perfect lockstep; a reading of -1 means they move in opposite directions.