Crypto Markets Slide Into "Fear" Territory as Tech Selloff Spreads to Digital Assets

Cryptocurrency markets declined on Tuesday trading alongside a broader technology selloff as investors rotated out of risk assets ahead of Federal Reserve Chair Jerome Powell's closely watched Jackson Hole speech on Friday.

Bitcoin has dropped 1.18% in 24 hours to $113,688, extending its weekly decline to 4.78% and sliding 8% from its August 14 all-time high above $124,000. The cryptocurrency briefly touched $112,000 early Wednesday before recovering, triggering $113 million in long position liquidations as it failed to hold key technical support at $121,500.

Ethereum performed worse, declining 1.4% to $4,182 and extending weekly losses to 9.55%. The selloff was amplified by continued ETF outflows and macro uncertainty surrounding Fed policy direction.

Total cryptocurrency market capitalization fell 0.78% to $3.84 trillion, with the crypto Fear and Greed Index dropping 12 points to 44, entering "fear" territory as macro headwinds weighed on digital assets.

The crypto decline mirrored broader risk-off sentiment in traditional markets, where the S&P 500 closed down 0.59% at 6,411.37 and the tech-heavy Nasdaq Composite fell 1.46% to 21,314.95. The Nasdaq 100 declined 1.39% as investors shed exposure to premium-valued growth names.

Technology giants bore the brunt of the selling pressure. Nvidia dropped 3.5%, while AMD and Broadcom fell 5.4% and 3.6% respectively. High-flying software company Palantir tumbled over 9% to become the S&P 500's worst performer on Tuesday, while Tesla, Meta, and Netflix also declined.

"The rotation reflects investor caution around assets trading at premium valuations based on future growth expectations. Both crypto and high-growth tech stocks, despite strong fundamental execution, command elevated multiples that attract buying during rallies but face swift abandonment during market pullbacks as investors reassess risk," BRN analysts said in a note on Wednesday.

Market participants are positioning defensively ahead of a week packed with Fed-related events, including the release of Fed meeting minutes and extensive "Fed speak" as policymakers gather at their annual Jackson Hole retreat. Powell's Friday speech is expected to provide crucial guidance on the central bank's approach to interest rate cuts.