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Bitcoin drops below $40,000 for the first time since mid-March

Bitcoin, the world’s largest cryptocurrency by market capitalization, fell below $40,000 today for the first time since March 16.

The drop in prices comes as investors weigh the risks of rising interest rates, soaring inflation and the global trade order resulting from Russia’s attack on Ukraine.

As of press time, Bitcoin has dropped 6.41% in the past 24 hours to $39,706. Ether also fell 7.14% to $2,983.

Concerns about rising interest rates and expectations of tighter monetary conditions continue to be at the heart of Bitcoin investors,” Bitcoin-focused asset manager Nydig wrote in a note to Bitcoinist. the investors.

BTC’s market has recently become unusually synchronized with US equities in light of the Fed’s pledge to shrink its balance sheet by nearly $9 trillion to $95 billion per month.

A move to reduce the total assets of the US central bank would effectively reverse the key stimulus plan used in 2020 and 2021 to underpin traditional markets, the financial system and the economy. economy. Bitcoin price quadrupled in 2020 and increased 59% last year.

According to Lucas Outumuro, head of research at IntoTheBlock, traders are now assessing the potential impact of the balance sheet cuts – known as “quantitative tightening” – along with multiple waves of increase interest rates by 0.5%. In recent economic cycles, the Fed has moved at a slower pace, with gains of just 0.25%.

This has weighed on risk assets and increased the correlation between cryptocurrencies and equities,” Outumuro said.