Bitcoin briefly fell below $30,000 on Tuesday for the first time since July 2021.
It reflects investors’ reluctance to own riskier assets as the Fed hikes interest rates.
Bitcoin also slid sharply on Monday, leaving it more than 50% below its all-time high last year.
Bitcoin briefly dipped below $30,000 on Tuesday for the first time since July 2021, as investors ditched riskier assets in light of growing concern about the economic outlook.
The world’s most-traded cryptocurrency fell to an overnight low of $29,994 before rebounding above the $30,000 mark. At the time of writing, bitcoin was down 3.6% on the day at $31,793, according to CoinMarketCap.
The slide was exacerbated by the Luna Foundation Group, a non-profit organization that works with the terra network, saying on Tuesday it would sell some of its bitcoin holdings to defend the blockchain’s UST stablecoin’s 1:1 peg with the US dollar.
Bitcoin is now almost 60% below its all-time high above $69,000 last November, while its market value has fallen to closer to $600 billion from almost double that just six months ago.
The cryptocurrency market has come under pressure along with stocks and bonds, as the Federal Reserve has ramped up its efforts to fight inflation by raising interest rates more quickly. Earlier this month, the central bank raised the benchmark rate by half a point to 1%, the largest increase in 22 years.
With inflation running at 40-year highs and interest rates rising, investors are shunning more speculative assets. Ether and meme stocks like dogecoin and shiba inu have fallen between 11 and 15% in the last week, according to CoinMarketCap.
“The broad wave of risk-off sentiment injected by the Federal Reserve’s latest interest rate decision has investors ditching risk assets at an impressive, yet worrisome pace,” Thomas Westwater, an analyst at DailyFX said.
According to Michael Brown, a markets strategist at Caxton FX, bitcoin is set to drop even further and it was “increasingly likely to take out last summer’s lows around $28,000,” he said.
Not everyone is bearish on risk. JPMorgan’s top strategist Marko Kolanovic remains bullish even as markets plummet as a result of hiked interest rates. Kolanovic said he’s remaining “pro-risk” and is encouraging investors to buy up risky assets, saying central banks have reached “peak hawkishness.”
The S&P 500 fell 3.2% to a one-year low on Monday, marking its largest three-day fall since March 2020, for example, while the tech-heavy Nasdaq Composite dropped more than 4%.
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