Bitcoin’s sharp rally on Wednesday proved to be short-lived.

Cryptocurrencies tumbled on Thursday, with Bitcoin down nearly 7.5% as of 9:15 a.m. ET, once again falling below the $40,000 level. Ethereum slid just under 6%, Cardano was down more than 5% and Solana was off 6.5%. The losses largely erase the big gains cryptos saw yesterday following President Biden’s executive order on digital assets.

A massive spike in inflation in February and the ongoing war in Ukraine are the primary reasons for the drop. Food and energy costs led prices up 7.9% last month, the biggest increase in over 40 years. Markets are also scaling back as Russia’s invasion of Ukraine is expected to result in a recession across Europe, with inflation expected to increase sharply in that region as well.

Traders, who have already begun to bake in rate increases from the U.S. Federal Reserve, are reportedly getting more concerned about a possible unexpected rate hike from the European Central Bank, which will announce its latest decision about rates on March 10.

Some analysts also suspect Wednesday’s drop could be a delayed reaction to Biden’s order, as realization sets in that the risk of potential regulation was not ruled out.

Crypto wasn’t alone in its reversal of fortune. Stocks opened sharply lower on Wednesday, with the Dow, Nasdaq and S&P all posting losses.

By block head

Block Head is a blockchain journalist.