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The price of bitcoin fell to its lowest point since September on Monday as rising rates continue leading investors to shed positions in risky, growth-oriented assets.
Bitcoin fell as much as 6% to touch a low of $39,771.91, according to Coin Metrics. It last traded about 3.5% lower to $41,014.85. Ether, the second largest cryptocurrency by market cap, fell more than 7% to below the $3,000 mark. The cryptocurrency tumbled as low as $2,940, Coin Metrics found.
Declines across the cryptocurrency market follow a week of rough trading for equities, particularly momentum stocks in tech. As the 10-year U.S. Treasury yield spiked to start 2022, investors have been rotating into more cyclical and value names. On Monday, the 10-year climbed as high as 1.8%, after ending 2021 at 1.5%.
“We’ve seen bitcoin behave like a risk asset on numerous occasions over the past few months,” said Noelle Acheson, head of market insights at Genesis. “When the market gets jittery, bitcoin tumbles. We’ve seen various indications that market sentiment is somewhat spooked by the spike in the 10-year – that’s not good for any asset that has high volatility in cash flows. Unlike many assets that are tainted by this brush, bitcoin is liquid and therefore can take more selling pressure without a heavy hit.”
Bitcoin hit a record high near $69,000 in November following a hot inflation reading that at the time showed the biggest jump in consumer prices in 30 years. That reading caused investors to jump into inflation hedges, including bitcoin as well gold.
Because of the way the cryptocurrency has traded in tandem with equities, investors more than ever are split on whether it serves as a sound inflation hedge or not. Last week, before the Fed minutes were released, Goldman Sachs issued a report saying the firm sees bitcoin taking market share from gold and potentially climbing to $100,000.
Cryptocurrency prices have fallen steadily since November, however, with bitcoin dropping about 40%, then dropped more sharply with stocks after the Fed last week indicated its intentions to begin reducing its balance sheet. That’s in addition to what investors have already been preparing for — its tapering of bonds and raising interest rates.
Crypto stocks were lower Monday too. Coinbase fell about 6%, while Microstrategy and Block, formerly Square, dropped about 5%. Crypto banks Silvergate and Signature were down by 6% and 2%, respectively.