Bitcoin slumped to the lowest level since its December flash crash as growing expectations of rising borrowing rates weighs on some of the best performing assets over the past few years.
The largest cryptocurrency by market value dropped as much as 5.3% to $43,764. That pushed the price to the lowest level since a weekend crash at the start of last month. Bitcoin has surged more than 500% since the end of 2019 in the wake of stimulus measures put in place during the Covid-19 pandemic.
The Blomberg Galaxy Crypto Index, which includes Ethereum, Litecoin, Bitcoin Cash and EOS, slumped about 5%. Tokens of popular DeFi applications including Uniswap and Aave declined
“It’s a speculative investment and volatility is going to be a constant there,” David Donabedian, chief investment officer of CIBC Private Wealth Management, said by phone.
The recent swings in cryptocurrencies come amid a volatile period for financial markets. Spiking inflation is forcing central banks to tighten monetary policy, threatening to reduce the liquidity tailwind that lifted a wide range of assets.
U.S. equities deepened losses after minutes from the Federal Reserve flagged the chance of earlier and faster interest rate hikes. The S&P 500 fell 1.9%, led by real estate stocks, while the tech-heavy Nasdaq 100 slid 3.1%.
“The Fed is hawkish,” said Stephane Ouellette, chief executive and co-founder of crypto platform FRNT Financial Inc. “Knee-jerk reactions in crypto tend to treat them as exclusively risk assets in spite of the longer term trends around inflation, store of value et cetera.”
Other sectors of the crypto world are also under pressure. Bitcoin mining stocks took a beating as analysts reconsider their outlooks after a record-breaking year.
Bitcoin had climbed to a record of almost $69,000 in early November after U.S. regulars allowed bitcoin futures-based exchange-traded funds.
This article was provided by Bloomberg News.
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