and other cryptocurrencies dropped Monday as expectations that the Federal Reserve will move aggressively to tighten monetary policy continued to rock the digital asset space.
Bitcoin fell 3% over the past 24 hours to around $38,500, having moved below the key $40,000 level late on Friday. The price of the largest crypto was as high as $43,000 last Thursday before the slide began.
“The crypto markets tumbled this morning, as bitcoin fails to hold the $40,000 level,” said Marcus Sotiriou, an analyst at digital asset broker GlobalBlock.
Bitcoin and other cryptos should in theory trade independently of mainstream financial markets, but they have proved correlated with other risk-sensitive assets like stocks — especially tech stocks — and were moving lower in tandem with equities on Monday.
was down 1% Monday after the index tumbled 2.8% last Friday.
The latest wave of pressure on cryptos and stocks began on Thursday, when Federal Reserve Chair Jerome Powell signaled the central bank was likely to raise interest rates by a sizable half-point at its next meeting as the Fed fights historically high inflation. Powell said that taming inflation was “absolutely essential.”
Tighter monetary policy and higher interest rates will increase the cost of borrowing and are likely to dampen investor sentiment on assets that are viewed as riskier, like cryptos.
“Despite the hawkish Federal Reserve, bitcoin’s on-chain metrics are contrastingly bullish,” added Sotiriou, referring to data from the blockchain, the decentralized ledger that underpins Bitcoin.
“Data from Glassnode shows that the percentage of bitcoin’s supply that has not moved in one year is at an all-time-high,” the analyst said. “This data tells us that whilst these macro headwinds are ongoing, bitcoin is being distributed from those who see it as a risk-on asset, to long-term holders who have strong conviction in bitcoin’s long-term potential.”
This week does hold some potential for gains in digital assets, however, in the form of corporate earnings from Big Tech.
Bitcoin has lately shown itself to follow the tech-focused
and some of the largest U.S. tech companies are scheduled to report quarterly results this week. When tech giants outperform, they can sometimes pull the rest of the market higher with them, but the reverse is also true.
(AMZN) all report earnings this week.
Bitcoin’s smaller peer,
also retreated, losing 4% to just above $2,800. The token underpinning the Ethereum blockchain network topped $3,150 as recently as last Thursday but fell through the $3,000 level late Friday.
“Altcoins,” or smaller cryptocurrencies, were also falling.
and avalanche dropped 3%, and
was 4% lower.
“Memecoins” — called that because they were intended as internet jokes rather than significant blockchain projects — were mixed, with
down 1%. But there was one major standout to a sea of red in the digital asset space:
which shot 6% higher.
The cryptocurrency most associated with
(ticker: TSLA) CEO Elon Musk gained following reports that the billionaire’s offer to buy the social media platform
(TWTR) could be accepted and that an agreement could be announced as early as Monday.
Write to Jack Denton at [email protected]