SINGAPORE (BLOOMBERG) - Bitcoin briefly dropped below US$42,000 (S$57,000) for the first time since March 23, sliding back further into the range in which it has traded this year on mounting concerns about rising interest rates.
The largest cryptocurrency fell as low as US$41,918 on Monday morning (April 11) in Asia, retreating for the seventh day in the past eight.
Since peaking at just above US$48,000 in late March, Bitcoin - and other tokens - has been dragged lower by concerns about tighter monetary policy. Even the buzz around last week's Bitcoin 2022 conference in Miami was not enough to reverse the trend.
Inflation in the United States likely accelerated to 8.4 per cent in March, the fastest pace since early 1982, economists surveyed ahead of data due on Tuesday predicted. The Federal Reserve may need to hike interest rates above 4 per cent, Goldman Sachs chief economist Jan Hatzius said on Friday.
Expectations for tighter monetary policy have hurt demand for riskier assets such as cryptocurrencies and tech stocks, which are increasingly moving in tandem.
"Now that the sugar rush of Bitcoin 2022 has passed, Tuesday's (likely) ugly US consumer price report is a reminder that the Fed is caught between a rock and a hard place when it comes to tackling runaway inflation without sinking the economy," said Mr Antoni Trenchev, managing partner of crypto lender Nexo, in e-mailed comments.
Bitcoin also briefly dipped below its 50-day moving average. The token traded at US$42,270 at 9.40am in Hong Kong, down about 2 per cent for the day. Ether slipped 2.8 per cent to US$3,196. Equities were mixed. The Chinese markets were down sharply, while Australian and Japanese stocks were little changed.
Bitcoin has been in a trading range of around US$35,000 to US$45,000 for much of the year so far. The breakout above US$48,000 last month briefly erased its losses for the year, but the token hit resistance around its 200-day moving average.
Miller Tabak + Co chief market strategist Matt Maley said he does not see the sell-off as particularly concerning.
"The pullback from the late March high is more technical than anything else," Mr Maley said in e-mailed comments. "After its 35 per cent rally from January to late March, Bitcoin had become very overbought. So it's just working off that condition. As long as it can hold above US$40,000, its multi-month upward trend will remain intact."
Still, Bitcoin's tendency to move in sync with assets such as US tech stocks makes the drop less of a surprise after a tough time for American markets last week. Its correlation with the Nasdaq 100 Index is now back at record levels.
"The Nasdaq 100 closed below its 50-day moving average on Friday, so now wouldn't be a bad time for Bitcoin to break its correlation with the tech-laden index," Nexo's Mr Trenchev said. "Close above US$45,000 again and we're back in the game."
