Bitcoin and other cryptocurrencies slipped lower on Monday, continuing to come under pressure from an environment of rising bond yields and expectations of tighter monetary policy from the Federal Reserve.
Bitcoin prices fell 2% over the past 24 hours to around $41,500. The leading digital asset was trading hands near $47,000 early last week and tumbled through the key technical level of $45,000 last Wednesday.
“Bitcoin is down again as institutional investors grow nervous over the upcoming pace of tightening by the Fed,” said Edward Moya, an analyst at broker Oanda. “Bitcoin’s cage is the $38,000 to $48,000 range and that could hold over the next week or two.”
Moya added that the Bitcoin 2022 conference in Miami, which ended over the weekend, concluded without the announcement of any major new investments. Analysts were watching the conference as a possible catalyst to buoy prices.
Ether, the second-largest cryptocurrency, was down 5% to nearly $3,000. The token underpinning the Ethereum blockchain network topped $3,500 early last week.
Smaller cryptos, or “altcoins,” similarly felt pain, with solana declining 4%, cardano sliding 5%, and litecoin 5% lower. “Memecoins”—called that because they were initially intended as internet jokes rather than significant blockchain projects—were also in the red, with dogecoin and shiba inu each down 4%.
The digital asset space is feeling a similar pinch to the stock market. While bitcoin and its peers should theoretically trade independently of mainstream financial markets, cryptos have shown themselves to be correlated with other risk-sensitive investments, like tech stocks.
Stocks were firmly lower on Monday as investors braced for an aggressive shift in monetary policy from the Fed. Markets are expecting the central bank to raise interest rates many times this year and next as it battles historically-high inflation, and the Fed will also engage in quantitative tightening through the reduction of its balance sheet.
Higher borrowing costs would dent economic demand and could dampen the sentiment for risk assets like bitcoin. This environment is also leading to a surge in bond yields, which have pushed tech stocks lower. High-growth companies like those in the tech sector have valuations that bank on profits years into the future—and elevated yields discount the present value of future cash.
The tech-heavy Nasdaq Composite fell 1.3% last Friday while the Dow Jones Industrial Average rose 0.4%. The Nasdaq was on track for another underperformance Monday, with futures tracking its 100-largest constituents—the Nasdaq-100 —down 0.7%.
At least one high-profile figure in the crypto world sees falling tech stocks as decidedly bad news for bitcoin and other cryptocurrencies.
“Bitcoin and ether are highly correlated to the Nasdaq-100. If the [Nasdaq-100] tanks, it will take crypto down with it,” Arthur Hayes, the co-founder of crypto trading firm BitMEX, said in a blog post on Monday.