Crypto had a brutal start to the week. One crypto lender halted withdrawals, another announced job cuts , and the market cap of the beleaguered sector fell below $1 trillion, down from $3 trillion at its peak in November . Bitcoin plunged 15% to fall below $23,000 — an 18-month low. Ethereum , widely seen as the second most popular cryptocurrency in the market, fell 17%. The sell-off came as investors rotate out of the riskiest assets and into safer bets as macroeconomic headwinds mount and the prospect of an aggressive rate hike cycle becomes more apparent. Software maker MicroStrategy and crypto exchange Coinbase were among the casualties in Monday’s rout, with the stocks closing down more than 25% and 11% respectively. This was good news for hedge fund manager David Neuhauser — who had initiated short positions on both stocks early in the second quarter of this year. Neuhauser, who is founder and chief investment officer of Livermore Partners, did not disclose the dates that the short positions were initiated, but both stocks have sold off massively since the second quarter. Shares in MicroStrategy closed at around $152 on Monday — representing a decline of more than 60% since Mar. 1, while more than 70% of Coinbase’s market value have been wiped out in the same period. Neuhauser told CNBC Pro that the trigger for initiating the shorts was came as inflation was “getting hotter and hotter.” “That was when we started to see the Fed become extremely hawkish, which meant that rates were going to go up dramatically more,” Neuhauser said. “They were going to start to raise rates much more dramatically because inflation prints were becoming hotter and hotter. The labor market was also becoming harder and hotter.” In response, Neuhauser began to look for “pressure points” — stocks that could be impacted by such a challenging macro backdrop. “Bitcoin looked to be one of those pressure points. And essentially that’s why we implemented [the shorts] at that time, because if rates keep going up, things like bitcoin that have no true intrinsic value and no earnings power behind them — there’s only one place to go, which is down,” he added. The performance of MicroStrategy and Coinbase shares are closely linked to bitcoin prices and transaction volumes. As of Apr. 4, MicroStrategy owned more than 129,000 bitcoins, which the company acquired for approximately $3.97 billion at an average purchase price of around $30,700 per bitcoin, according to its latest quarterly filing with the U.S. Securities and Exchange Commission. MicroStrategy’s bitcoin holdings are now worth just under $3 billion, placing the company’s paper losses at around $1 billion. Coinbase makes a commission when people buy and sell cryptocurrencies and so is directly impacted by a fall in transaction volumes. Worst is yet to come Neuhauser believes the worst is yet to come for the sector, with the Fed likely to pursue a more aggressive rate hike cycle to tamper hotter-than-expected inflation in the U.S. “The reality is that rates are going up, and they are going to continue to go up, they’re not stopping. So, if they’re not stopping and rates are going to continue to ratchet up, it’s a negative for areas of speculation in the market that have no yield and no utility — such as bitcoin,” he said. The Livermore Strategic Opportunities Fund is up more than 10% this year, according to Neuhauser, with the fund’s short positions returning more than 3%.