The crypto market had a rough start to the week

One crypto lender has halted withdrawals, another has announced job cuts, and the sector's market cap has fallen below $1 trillion, down from $3 trillion at its peak in November.

Bitcoin fell 15% to less than $23,000, an 18-month low. Ethereum, widely regarded as the market's second most popular cryptocurrency, fell 17 percent.

As macroeconomic headwinds mount and the prospect of an aggressive rate hike cycle becomes more apparent, investors are shifting away from riskier assets and toward safer bets.

MicroStrategy and cryptocurrency exchange Coinbase were among the losers in Monday's rout, with shares falling more than 25% and 11%, respectively.

This was good news for hedge fund manager David Neuhauser, who had begun shorting both stocks in the second quarter of this year.

Neuhauser, the founder and chief investment officer of Livermore Partners, did not specify when the short positions were established, but both stocks have fallen precipitously since the second quarter.

MicroStrategy shares closed at around $152 on Monday, representing a drop of more than 60% since March 1, while Coinbase's market value has been wiped out by more than 70% in the same period.

According to Neuhauser, the trigger for initiating the shorts came as inflation "got hotter and hotter."

"That was when we started to see the Fed become extremely hawkish, which meant that rates were going to rise significantly more," Neuhauser explained.

"They were going to start raising rates much more dramatically because inflation prints were heating up." The labour market was also becoming more difficult and competitive."

As a result, Neuhauser began to look for "pressure points" — stocks that could be impacted by such a difficult macro backdrop.

"Bitcoin appeared to be one of those stress points." And essentially, that's why we implemented [the shorts] at the time, because if rates continue to rise, things like bitcoin, which have no true intrinsic value and no earning power, have only one direction to go, which is down," he added.

MicroStrategy and Coinbase stock performance is closely related to bitcoin prices and transaction volumes.

According to its most recent quarterly filing with the Securities and Exchange Commission, MicroStrategy owned more than 129,000 bitcoins as of April 4, which it purchased for approximately $3.97 billion at an average purchase price of around $30,700 per bitcoin.

MicroStrategy's bitcoin holdings are now worth slightly less than $3 billion, putting the company's paper losses around $1 billion.

Coinbase earns a commission when people buy and sell cryptocurrencies, so a drop in transaction volumes has a direct impact on the company.

Neuhauser believes the worst is yet to come for the sector, with the Fed likely to pursue a more aggressive rate hike cycle to cool the country's hotter-than-expected inflation.

"The reality is that interest rates are rising and will continue to rise; they are not going to stop." So, if they don't stop and rates keep rising, it's a negative for areas of speculation in the market that have no yield and no utility — such as bitcoin," he said.

According to Neuhauser, the Livermore Strategic Opportunities Fund is up more than 10% this year, with the fund's short positions returning more than 3%.