Bitcoin dropped below $42,000 for the first time since March 23, returning to the price range it was trading in amid concerns about rising interest rates.
Bitcoin dropped as low as $41,503 on Monday morning and continued its last seven-day decline. Since peaking at just over $48,000 at the end of March, Bitcoin and other tokens have been dragged down amid concerns about tighter monetary policy. Even the excitement around the Bitcoin 2022 conference in Miami last week wasn't enough to reverse the trend.
U.S. inflation is likely to hit 8.4% in March, the highest acceleration since early 1982, according to a poll by economists ahead of Tuesday's data release. Goldman Sachs Group Inc. The Fed may need to raise interest rates by over 4%, Chief Economist Jan Hatzius said on Friday.
Expectations for tighter monetary policy have negatively impacted demand for riskier assets, such as increasingly co-moving cryptocurrencies and technology stocks. Other major tokens also fell on Monday. Polkadot fell 8.7% and Ether fell 4.6%.
Analysts think that Bitcoin's sweet months have passed and the US consumer price report, which is likely to be published on Tuesday, will push the Fed to tighter monetary policies. If the report is negative, as many predict it will be, a new shock wave may engulf the markets.
Amid all this negativity, Bitcoin fell below its 50-day moving average. At the time of this news, Bitcoin price was trading at $ 41,509. Similarly, equities are mostly trading lower, with Chinese markets falling sharply and Europe's Stoxx 600 benchmark falling 0.6%.
Bitcoin has been in the trading range of around $35,000 to $45,000 for most of the year so far. A break above $48,000 last month erased some of its losses over the year, but Bitcoin is seeing some serious resistance around its 200-day moving average.
Analysts state that Bitcoin was overbought after its 35% increase rally from January to the end of March. As long as Bitcoin can hold above $40,000, the uptrend for several months may remain intact.
Still, Bitcoin's tendency to move in sync with assets like US tech stocks suggests that the drop isn't all that surprising after a tough week for American markets. Bitcoin's correlation with the Nasdaq 100 Index has now reached record levels.