The largest cryptocurrency declined as much as 4.9% to $41,008, marking a tumble of about 40% from its record near $69,000 reached Nov. 10. Second-largest Ether dropped as much as 8.3% to its lowest level since Sept. 30.
The retreat comes after minutes from the Federal Reserves December meeting, published Wednesday, flagged the chance of earlier- and faster-than-expected rate hikes as well as potential balance-sheet rundown.
“The Fed‘s intention to reduce the balance sheet in Q1 2022 is the primary cause of this sell-off,” Fundstrat strategists said in a note Thursday. “Unfortunately, no immediate support looks likely ahead of September 2021 lows at $39,573, with breaks of that leading down to last summer’s May-July bottom.”
Bitcoin gained about 60% last year, outperforming other asset classes amid a narrative that included institutional adoption, inflation protection and investment diversification. Its struggled in recent weeks, though, amid a volatile period for financial markets. Spiking inflation is leading central banks to tighten monetary policy, threatening to reduce the liquidity tailwind that lifted a wide range of assets.