The price of bitcoin fell below $42,000 in trading today for the first time since March 23, largely on growing concerns about rising interest rates.
Bitcoin fell as low as $41918 on Monday morning. Since peaking at just over $48,000 in late March, the currency has been weighed down by investor concerns about Fed tightening. U.S. inflation likely hit 8.4% in March, the highest since early 1982, according to economists surveyed. The figures will be released on Tuesday. Goldman Sachs Chief economist Jan Hatzius said on Friday that the Fed may need to raise interest rates above 4 percent to curb inflation.
Investor expectations of tighter monetary policy have hurt demand for riskier assets such as cryptocurrencies and technology stocks. "Bitcoin's 2022 'upturn' is behind us, and Tuesday's U.S. CPI report will remind us that the Fed is caught between controlling inflation and preventing an economic downturn," commented Antoni Trenchev, Managing Partner at Nexo.
Bitcoin also briefly broke below its 50-day moving average. The currency was down 1.93% on the week at $42011 as of press time.
Bitcoin has fallen to near its 50-day average
So far this year, bitcoin has mostly traded between $35,000 and $45,000. The currency briefly regained its year-to-date losses above $48,000 last month, but hit resistance near its 200-day moving average.
Matt Maley, chief market strategist at Miller Tabak + Co., said he did not see the sell-off as particularly worrisome. He said bitcoin was already overbought after rising 35 percent from January to the end of March. So the main reason for the pullback from the late-March highs is technical. As long as the currency can stay above $40,000, its multi-month uptrend will remain intact."
In addition, bitcoin is now observed to be moving in tandem with riskier assets such as US technology stocks, with its correlation with the Nasdaq 100 index rising to record levels.
Bitcoin's correlation with the NASDAQ 100 index has reached a new high