According to Bloomberg News, there was a brief drop in Bitcoin, registering the figure below $42,000 for the first time since March 23rd, dropping further back into this range. It had traded earlier in the current year amidst concerns of rising interest rates.
The reason for the price drop: Stringent monetary policy
The largest digital currency dropped as low as $41,918 on Monday morning in Asia, a retreat for seven consecutive days among eight. Since the time it peaked in late March at $48,000, Bitcoin and the other tokens have been pulled further lower by concerns of stringent monetary policies. Even the Bitcoin 2022 conference held in Miami was not enough to the trends.
The US inflation accelerated to 8.4% in March, the fastest pace since the beginning of 1982; economists have surveyed ahead of the data due to the prediction of Tuesday. According to Jan Hatzius, the chief economist at Goldman Sachs Group Inc., the Federal Reserve might have to increase interest rates much above 4%.
Anticipations for stringent monetary policy have adversely impacted demand for riskier assets like tech stocks and cryptocurrencies, which are in tandem movement.
Bloomberg News reports that Bitcoin dropped below the 50-day moving average. At 9:40 am in Hong Kong, the token traded at $42,270, a drop of about 2%. Ether slid back 2.8% to $3,196. The Chinese markets were down, equities were mixed, while Japanese and Australian stocks changed.
Bitcoin has been trading in approximately $35,000 and $45,000 for most of the year so far. Last month, the breakout above $48,000 briefly wiped off losses for the year. However, the token hit resistance around the 200-day moving average.
According to Miller Tabak + Co., Matt Maley, the Chief Market Strategist, says the selloff is not a cause of concern. Maley also said the pullback from the end of March high is more of a technical nature than anything else. Bitcoin had become extensively bought following its 35% rally. The “multi-month” uphill trend that Bitcoin has manifested will stay intact if it can hold above $40,000.
Still, the tendency of Bitcoin to move in sync with assets like the tech stocks in the United States makes the decline less surprising after a rough week last week for the markets in America. Its correlation with the NASDAQ 100 index has returned to the record levels.
As per Nexo’s Trenchev, the NASDAQ 100 closed below the 50-day moving average on Friday. It will not be a bad time for breaking the correlation with Bitcoin, the tech-laden index.
