Bitcoin, the world's largest cryptocurrency by market capitalization, fell below $40,000 on Monday for the first time since March 16.
Bitcoin Falls Below $40K for First Time Since Mid-March
The fall in price comes as investors weigh the risks of rising interest rates, soaring inflation and dislocation of global commerce as a result of Russia's invasion of Ukraine.
As of press time bitcoin (BTC) was down 8.5% over the past 24 hours to $39,783.
"Rising interest rate fears and the expectation of tighter monetary conditions continues to be a focus for bitcoin investors," bitcoin-focused asset manager Nydig wrote in a note to investors.
The bitcoin market, which has become unusually synced lately with U.S. stocks, has been pricing in the Federal Reserve's pledge to shrink its nearly $9 trillion balance sheet by as much as $95 billion a month.
A move by the U.S. central bank to reduce its total assets would effectively reverse a key stimulus plan used in 2020 and 2021 to bolster traditional markets, the financial system and the economy; bitcoin's price quadrupled in 2020 and rose 59% last year.
Now traders are assessing the potential impact of the balance sheet reduction – referred to as "quantitative tightening" – along with multiple interest-rate hikes of 50 basis points (0.5 percentage point) each, according to Lucas Outumuro, head of research at IntoTheBlock. In recent economic cycles, the Fed has moved at a slower pace, with hikes of just 25 basis points.
"This has weighed down on risk assets and increased correlations between crypto and stocks," Outumuro said.