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Bitcoin plunges to below $40,000 for first time since August as cryptos track Wall Street's tech rout

Bitcoin price dollars
Bitcoin has tumbled to far below November's high of close to $69,000.

Dado Ruvic/Reuters

  • Bitcoin tumbled to below $40,000 for the first time since August, as a broad crypto sell-off intensified.

  • Investors have dumped both cryptocurrencies and tech stocks as they prepare for the Fed to hike interest rates in 2022.

  • Ethereum fell below $3,000 while binance coin, cardano and solana were all deep in the red Friday.

Bitcoin slid below $40,000 and ethereum dropped to under $3,000 as a broad sell-off intensified Friday, with investors dumping cryptocurrencies along with tech stocks as they prepare for the Federal Reserve to hike interest rates.

Bitcoin was down 6.6% to $39,140.16 on the Coinbase exchange as of 3.45 a.m. ET. The biggest and oldest cryptocurrency has slumped nearly 20% over the last month to stand far below November's record high of close to $69,000.

Meanwhile, ethereum was down 7.8% to $2,894.41. It has fallen almost 30% over the last month, having hit a record high of close to $5,000 in November.

Investors have been rapidly selling both cryptocurrencies and speculative technology stocks in anticipation of the Fed withdrawing its support for markets and the economy in 2022. Traders think the central bank will raise rates four times this year, an expectation that has rapidly pushed up bond yields.

Higher bond yields have in turn made crypto and unprofitable tech companies look unattractive, given that neither offer yields of their own. Instead, investors have pivoted towards so-called value stocks in sectors such as energy and finance that are more closely linked to the health of the economy.

"The pessimism continues to grow among investors and traders when it comes to riskier assets and this is chiefly influencing the price of equities and bitcoin," Naeem Aslam, chief market analyst at AvaTrade, said.

"From the technical price perspective, the bitcoin price has violated the key support level of $40,000, which was already tested a few times before. Now all eyes are on the next two important price levels: $35,000 and the most important one is $30,000."

Read more: A 21-year veteran trader breaks down an options trade designed to help investors 'sustain risks long enough to see the light of profitability' — and explains why bitcoin could continue to move in tandem with tech stocks

Even bitcoin bulls have become concerned about the impact of Fed policy and bond yields on the crypto market.

Galaxy Digital founder and crypto billionaire Mike Novogratz said this week: "As long as rates go higher, we will see pressure on Nasdaq and crypto." SkyBridge Capital boss Anthony Scaramucci has said his investment firm is not buying the dip this time around, despite recommending it in the past.

Thursday's proposal by Russia's central bank to outlaw the mining and trading of cryptocurrencies was another factor weighing on prices, analysts said.

The broad cryptocurrency complex was a sea of red Friday, according to prices on Coinmarketcap. Binance coin, the third-biggest token, was down close to 10%; cardano was around 9% lower; and solana had dropped roughly 8%.

However, Aslam said investors are likely to buy into the weakness at some point, with many investors seeing digital assets as the currencies of the future.

"Smart money and other institutions are certainly going to take advantage of the current price action, and they are likely to bag some great bargain."

Read the original article on Business Insider