The price of the virtual currency fell to its lowest point in over a year on Monday as investors sold riskier assets due to rising rates.
According to Coin Metrics, the price of Bitcoin fell to a low of $39,771.91. The market cap of the second largest coin, ether, fell to below $3,000. The coin fell as low as $2,940.
A week of rough trading for equities has led to a decline in the market for cryptocurrencies. As the 10-year U.S. Treasury yield spiked to start 2022, investors have been rotating into more value names. The 10-year climbed as high as 1.8% on Monday.
"We've seen it behave like a risk asset on a number of occasions over the past few months," said Noelle Acheson, head of market insights at Genesis. When the market is jittery, the market falls. We've seen indications that market sentiment is not good for an asset that has high cash flows because of the 10-year spike. Unlike many assets that are contaminated by this brush,bitcoin is liquid and can take more selling pressure without a heavy hit.
The biggest jump in consumer prices in 30 years was shown in a hot inflation reading in November, which led to a record high for the digital currency. The reading caused investors to jump into inflation hedges. Because of the way thecryptocurrencies have traded, investors are split on whether it serves as a sound inflation hedge or not.
The Federal Reserve indicated last week that it intended to begin reducing its balance sheet, which led to a sharp drop in the prices of cryptocurrencies. The investors have already been preparing for that and other things.
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