The price of bitcoin plunged below $33,000 on Monday – a downturn that has coincided with a sustained losing streak for US stocks as the market brace for the possibility of a recession.
Bitcoin was down about 5% to approximately $32,934 as of 9 a.m. ET, according to Coinbase data. The price fell to its lowest level since July 2021.
Risk-averse investors are shedding their volatile assets, such as crypto tokens and tech stocks, as the Federal Reserve moves forward with its plan to raise interest rates to fight inflation. The central bank is tightening monetary policy after taking a lenient approach during the COVID-19 pandemic.
“I think everything within crypto is still classed as a risk asset, and similar to what we’ve seen with the Nasdaq, most crypto currencies are getting pummeled,” Matt Dibb, COO of Singapore-based crypto platform Stack Funds, told Reuters.
The tech sector’s recent poor performance reflects a declining investor appetite for riskier holdings. The tech-heavy Nasdaq Composite finished 1.5% lower last week and posted its worst single-day drop since 2020 last Thursday during a rout in which the Dow Jones Industrial Average plunged more than 1,000 points.
Bitcoin’s current price is down substantially from its all-time high of $69,000 achieved last November. Its value has fallen about 50% over the last six months.
The broader crypto market performed even worse, sinking nearly 7% over the last 24 hours from 9 a.m. ET. Ether fell about 6% to $2,397.48, while Solana was down about 8% to $71.50.
Bitcoin is the largest cryptocurrency based on its market cap, which exceeds $626 billion.
Bitcoin’s 40-day performance correlation with the S&P 500 has hit a record high of 0.82, according to Bloomberg. If stocks struggle this week and beyond, the leading token and other cryptocurrencies are likely to sink as well.
Last week, the Fed matched the market’s expectation by hiking its benchmark interest rate by a half-percentage point.
Fed Chair Jerome Powell initially stoked a “relief rally” by revealing the bank wasn’t considering larger hikes to stem inflation – but that relief turned to panic as investors digested the difficulty of the Fed’s mission to cool the economy without triggering a recession.