Bitcoin (BTC) plunged by 7% Monday amid fears of interest rate hikes due to the Federal Reserve’s tightening monetary policies. The digital asset trespassed the $40,000 support level and hit $39,785.68 according to data by Coin Metrics.
Bitcoin’s Plunge
As reported by CNBC, this is the first time BTC drops to such levels since March 16, with the decline caused this time by the 10-year Treasury yield reaching a three-year high of 2.78% on Monday —the NASDAQ composite dropped 1% the same day.
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BTC trading has no correlation with the stock market, but the tendency has reverted in recent months, experts assert.
Riyad Carey, a research analyst at Kaiko, explained: “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.”
“Globally, the continuing war in Ukraine and increasing shutdowns in China are dragging on markets,” he added.
Other Ingredients
Carey says Terraform Labs’ bitcoin purchase in troves for its stablecoin reserves has triggered a market reaction that is playing a major role. The firm has roughly 40,000 bitcoin after buying $175 million worth over the weekend, CNBC reports.
“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.”
Other cryptocurrencies felt the brunt as Ethereum (ETH) dropped by 9%, Algorand (ALGO) plunged by 9%, while Solana (SOL) and Cardano (ADA) both dived by 11%. According to CoinDesk —citing data by Coinglass— BTC’s drop means that traders saw over $430 million in losses to liquidations.
“Longs, or positions of traders betting on upward prices, took the biggest hit and accounted for nearly 90%, or $386 million, of all losses in the past 24 hours. Shorts saw a relatively lower $44 million in losses.”
