The price of bitcoin stumbled on Monday as investors assessed the risks from rising rates and the potential for more tightening by the Federal Reserve.
Bitcoin last fell 7% to $40,009.78, according to Coin Metrics. Earlier in the day it fell to $39,785.68, falling below the key $40,000 support level for the first time since Mar. 16.
The decline came after the 10-year Treasury yield hit a three-year high of 2.78% Monday. Riskier assets tend to fall when yields rise. On Monday the tech-heavy Nasdaq Composite was down by more than 1%. Though bitcoin should trade independently of the stock market, a correlation between the two has been particularly high in recent months.
“Bitcoin and traditional markets have continued to respond negatively to expectations that the U.S. Fed will tighten its monetary policy to fight inflation, and Tuesday’s CPI release seems to be weighing heavily,” said Riyad Carey, a research analyst at Kaiko. “Globally, the continuing war in Ukraine and increasing shutdowns in China are dragging on markets.”
Carey also noted the market reaction to Terraform Labs buying bitcoin in troves for its stablecoin reserves – it holds about 40,000 bitcoin after buying $175 million worth over the weekend – has “largely played out.” Two weeks ago bitcoin climbed over the $48,000 level, turning positive for the year, as the group behind the Terra stablecoin stepped up its bitcoin buying.
Tokens across the crypto market were lower as well. Ether declined by about 9% along with other platform networks, according to Coin Metrics. Algorand’s ALGO lost more than 9%. Solana’s SOL and Cardano’s ADA were each down by 11%.