Bitcoin dropped around 8% Monday to trade below $40,000 for the first time since March 16, as investors eye the consumer price index data to be released on Tuesday while continuing to digest the Federal Reserve’s plans to aggressively raise interest rates and shrink its balance sheet.
was trading at around $39,878 on Monday, according to CoinDesk data. Ether
dropped 9% over the past 24 hours to around $2,998.
Bitcoin could plunge to as low as $30,000 by June, considering its strong correlation with tech-heavy Nasdaq 100 Index
recently, according to Arthur Hayes, co-founder of crypto exchange BitMEX.
Stocks of big tech companies will continue to suffer, noted Hayes. Minutes of the Fed’s March meeting showed that officials generally settled on shrinking the balance sheet by $95 billion per month after a 3-month phase-in, while many signaled they would support 50 basis point rate hikes at upcoming meetings if inflation remains high or gets even worse.
“As long as the 10-day correlation stays high, we must stay defensive on our crypto positioning,” Hayes wrote in Sunday notes.
Charlie Erith, chief executive at crypto investment advisor ByteTree, said that there’s “not likely to be a giant collapse” in the short term, as long as bitcoin trades above its fair valuation of $38,000, which was calculated using the network value to transaction ratio and on-chain data.
“If we broke that, it would be quite bearish,” Erith told MarketWatch in an interview.
Tony Nyman, FX fundamentals manager at Informa Global Markets said in a Monday note that $37,000 would be the next support level, as bitcoin drops below $40,000.
U.S. stocks traded lower on Monday, with the Dow Jones Industrial Average
falling 1.2% and the S&P 500