Bitcoin Briefly Lowest Since September As Investors Shed Risk

The price of bitcoin fell at one point Monday to its lowest low since September 2021, as rising rates continue leading investors to shed positions in risky, growth-oriented assets.

Bitcoin fell as much as 6% to touch a low of $39,771.91, according to Coin Metrics, but has since reclaimed some of its losses. It last traded about 4% lower at $40,758.90. Ether, the second-largest cryptocurrency by market cap, fell more than 6% to $2,979.82.

Declines across the cryptocurrency market follow rough trading for equities, particularly momentum stocks.

As the 10-year U.S. Treasury yield spiked to start 2022, investors have been rotating into more cyclical and value names. On Monday, the 10-year climbed as high as 1.8%, after ending 2021 at 1.5%.

Bitcoin tends to perform and behave like a risk asset on numerous occasions over the past few months, when the market gets jittery, bitcoin tumbles.

Various indications that market sentiment is also spooked by the spike in the 10-year Treasury yields that’s not good for any asset that has high volatility in cash flows.

Unlike many assets that are tainted by this brush, bitcoin is liquid and therefore can take more selling pressure without a heavy hit.

Bitcoin hit a record high near $69,000 in November, after a hot inflación reading that at the time showed the biggest jump in consumer prices in 30 years. That reading caused investors to jump into inflation hedges, including bitcoin and gold.

Because of the way the cryptocurrency has traded in tandem with equities, investors more than ever are split on whether bitcoin serves as a sound inflation hedge. Last week, Goldman Sachs said it sees bitcoin taking market share from gold and potentially climbing to $100,000.

Cryptocurrency prices have fallen steadily since November, sin embargo, with bitcoin dropping about 40%. It added to its losses last week, after the Federal Reserve indicated last week its intentions to begin reducing its balance sheet. That is in addition to what investors have already been preparing for; namely tapering of bonds and raising interest rates.

The cryptocurrency market looks to be moving in-line with the broader macro environment, most likely due to increasing overlapping institutional investor base, such as macro funds that allocate to crypto as well.

Bitcoin has been diverging from other crypto assets and suggested its moves reflect more about the macro environment and equities than they do about decentralized finance, Ethereum-alternative protocols, NFTs and the metaverse and other crypto sectors and altcoins.

The market dynamic of bitcoin has changed a lot in the last two years. It went from being largely you know crypto native. … Now, it really just trades as a 24/7 levered VIX. It’s much more important to those who care about the S&P and the big Treasuries, and everyday’s price action.

Crypto stocks also fell Monday. Coinbase fell about 6%, while Microstrategy and Block, formerly Square, dropped about 5%. Crypto banks Silvergate and Signature were down by 6% and 2%, respectively.