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As of Monday morning, Bitcoin is down to $32,940, a drop that marks a steep fall of more than 50% since its all-time high of $68,990 in November — and Bitcoin isn’t the only digital currency taking a dive. Ethereum, the second-largest cryptocurrency, also fell by 5% since Friday.
The dramatic drops follow the Fed’s move last week to hike interest rates by half a point to combat inflation. The largest interest rate increase in 20 years was met with slipping stocks far and wide, with European and Asian stocks also dropping on Monday. The pan-European Stoxx 600 slipped by 1.5% by late morning, and Japan’s benchmark Nikkei index fell by around 2.5%.
Analysts are signaling that the drops could indicate a new trend, wherein cryptocurrencies move in chorus with the market — challenging the belief that bitcoin could be used as an inflation hedge.
Still, it’s hard to say if the trend will persist, as the parallel falls of both crypto and the stock market are likely a product of rising inflation, with many investors taking a “risk-off approach,” selling both currencies in tandem to mitigate risk.
Unfortunately, some say the downward trend isn’t over, and is likely to continue for a few days.
“Until the market starts looking past the impact that [quantitative tightening] and raising rates will have, I find it difficult for Bitcoin to establish a broader up-trend,” Lucas Outumuro, head of research at IntoTheBlock, told Fortune.
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