Bitcoin Drops Most in a Month as Markets Turn Risk-Averse
(Bloomberg) -- Bitcoin fell for a fourth day as expectations for the biggest rise in U.S. interest rates in three decades diminishes demand for riskier assets.
The correlation coefficient between the Bitcoin and U.S. equities have climbed in the past 90 days as investors grow more risk adverse with the Federal Reserve pulling back on the pandemic era stimulus that is credited for helping to fuel the rise of crypto. Alternative coins such as Ether, XRP and Litecoin also fell.
Minutes from the Federal Open Markets Committee’s March meeting, released Wednesday, showed plans to start reducing the Fed’s balance sheet by more than $1 trillion a year while raising rates “expeditiously” to counter the hottest inflation in four decades.
“The FOMC minutes have reaffirmed our stance that we are likely not free of the turbulent waters” for cryptocurrencies, said Fundstrat digital-asset strategist Sean Farrell in a note Wednesday. “We still find ample reason to be constructive on asset prices in the immediate (relief rally) and long term (second half and beyond).”
Bitcoin briefly dropped below $43,000 for the first time since March 24 in early Asia trading, before recovering to around $43,400, down 1.1% for the day. It has fallen 6.2% this year. The declines in digital assets mirrored a broad equities selloff, with Japan’s Nikkei Index sliding 1.7%.
Altcoins have dipped further given their smaller market value and lower trading volume, which usually results in wider price swings. Cardano has fallen 7.2% over the past five days, while Solana is down 7.7%.
Bitcoin briefly surpassed $48,000 in late March to erase losses since year-end, spurring optimism that it would break out of the tight trading range in which it had been mired. Ether had been outperforming Bitcoin during the rebound due to its upcoming technical upgrade scheduled later this year.
Earlier, Billionaire crypto investor Michael Novogratz says that once the Fed takes a pause, Bitcoin could start to take off again.
Novogratz, who leads Galaxy Digital Holdings, predicted the central bank will remain “very hawkish for a while” due to high inflation, and will likely raise interest rates by 50 basis points soon. But as the economy slows down and the Fed steps back, “Bitcoin goes to the moon,” he said, repeating a popular crypto catchphrase.
Novogratz was speaking at the “Bitcoin 2022” conference in Miami, which kicked off on Wednesday with the unveiling of a bull statue that commemorates the city’s partiality toward cryptocurrencies and the digital-assets industry. The event has attracted more than 25,000 attendees.
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