$Bitcoin(BTC.CC)$, $Ethereum(ETH.CC)$ and other major coins crashed on Wednesday evening, as the global cryptocurrency market cap lost more than 6.4% to $1.2 trillion at press time.

Why It Matters: Cryptocurrencies dropped sharply in line with stocks, which crashed on inflation worries and worse-than-expected retail earnings Wednesday.

The Dow closed more than 1,100 points lower or 3.6% to 31,490.07 on Wednesday. The S&P 500 and the Nasdaq ended the day 4% and 4.7% lower respectively. 

The yield on the benchmark 10-year bond slid below the 3% mark on weak U.S. housing starts number, a harbinger of weakening growth.

GlobalBlock analyst Marcus Sotiriou said it is unclear what the rate hikes will look like after July. "The market believes there is a 4.5% chance of no more 50 basis point hikes after July and a 36% chance of 1 more 50 basis point hike after July," said Sotiriou in a note.

Sotiriou said he believes that inflation will begin to inflect down in August, September and October.

There are doubts whether the U.S. Federal Reserve would be able to deliver a "soft landing" as it fights inflation, said Edward Moya, a senior market analyst at OANDA.

Bitcoin was dragged down alongside most risky assets as Wall Street suffered the worst loss in almost two years.  Bitcoin remains a risky asset and vulnerable to further pain if the de-risking continues tomorrow." 

- said Moya, in an emailed note seen by Benzinga.

Cryptocurrency markets face systemic issues with stablecoins beyond the macro fundamentals. Glassnode tweeted that aggregate stablecoin supplies have dropped by a total of $8.4 billion over the last month, the largest such downfall in history. 

"This reflects a net capital outflow from the space," said the on-chain analysis firm.

Cryptocurrency trader Michaël van de Poppe said the question remains if Bitcoin can hold the $29,300 level, but said he is expecting a high-low on the apex coin's chart and the asset heading towards the $32,800-$34,000 level. 

Chartist Ali Martinez said 2.24 million addresses purchased 26.33 million ETH at $2,300 and weakness in the asset might prompt these to sell, which could see the second-largest coin drop to the "most important support" at $700 where 13.25 million addresses hold 13.1 million coins.