The stock market saw more declines on Wednesday morning, as investors dealt with a massive sell-off in the cryptocurrency market. After having seen huge gains throughout much of 2021, many major crypto token prices have fallen 40% to 50% or more from their highest levels just a few weeks ago.

Declines in major stock market indexes weren't all that large, but they did continue a downtrend that's been pronounced recently. As of 11 a.m. EDT today, the Dow Jones Industrial Average (^DJI 0.13%) was down 463 points to 33,598. The S&P 500 (^GSPC 0.13%) had dropped 54 points to 4,074, and the Nasdaq Composite (^IXIC -0.32%) had declined 116 points to 13,187.

Certainly, some crypto-centered stocks took big hits because of the cryptocurrency crash Wednesday. However, the broader market has other issues that are affecting its performance and are likely to remain in play well into the future. Below, we'll look more closely at both aspects of the day's market moves.

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Image source: Getty Images.

Big drops for crypto stocks

As you'd expect on a bad day for cryptocurrencies, crypto-related stocks were sharply lower. Among those hardest hit were:

  • Crypto exchange Coinbase Global (COIN -6.28%), which was down 7%.
  • Crypto mining specialists Marathon Digital Holdings (MARA -6.57%) and Riot Blockchain (RIOT -5.86%), falling 10% and 8%, respectively.
  • Industry banking institution Silvergate Capital (SI -7.50%), although it managed to narrow its losses to 3% after having been down as much as 10% earlier.
  • MicroStrategy (MSTR -4.57%), whose leveraged bets on cryptocurrencies have been well documented, saw its stock fall 9%.

Interestingly, though, the declines weren't as bad as the 15% to 25% plunges seen in crypto tokens themselves. That suggests that shareholders see the steep drop in cryptocurrencies as a normal weeding-out process that is part and parcel of the market. Certainly, those who've been involved with cryptocurrencies for longer than the past few months have had plenty of experience with the massive drops that have come in the crypto market historically.

So why is the stock market falling?

The boom in cryptocurrencies is only one facet of what many have seen as a larger and more worrisome trend across the investing universe. The low interest rates that have been part of the Federal Reserve's monetary-policy efforts to encourage economic activity have opened the door to massive leverage opportunities, and both individual and institutional investors have taken full advantage. The availability of cheap financing has resulted in a buying spree that has bid up asset prices not just in stocks but also in areas like real estate, where home prices have risen sharply over the past 12 months.

Now, higher prices for necessities are translating into inflationary pressure that jeopardizes the Fed's monetary policy. That has investors worried that rates will need to rise, thereby exposing the huge amount of leverage in the financial system. Yet while the economy is showing signs of strength, rate hikes could bring any expansion to a screeching halt. That would have ramifications for industries across the market, and that's a big part of why stocks look fragile on Wednesday.

The cryptocurrency crash doesn't have much of a direct impact on the stock market. But the fact that crypto prices are falling so sharply is one aspect of a bigger problem -- a problem that could bring short-term pain even to stocks with no crypto connection at all.