Macro ‘contagion’ sends bitcoin to lowest level in six months

Bitcoin was trading at levels not seen since July as macro concerns impact the cryptocurrency market. 

Bitcoin was trading near $33,000 on Monday, extending its losses by more than 50% since it hit all-time highs in November. The bearish moves were especially brutal last week, with ether falling by ~30% and other cryptocurrencies trading down by 40% or more. As of press time, bitcoin is changing hands at around $34,128, per Coinbase data. 

Cryptocurrencies and crypto company shares have fallen along with the broader market for tech stocks amid concerns about the US Federal Reserve’s plan to scale back its balance sheet and hike interest rates. In such a hawkish environment, investors typically flee riskier investments. As for what’s next, all eyes will be on the Federal Open Market Committee (FOMC) meeting this week which will begin the Fed’s efforts to reduce its balance sheet as a way to fight mounting inflation.  

Trading desk Genesis Global is expecting some “significant chop” in crypto prices leading up to the FOMC meeting. 

“The Fed is not going to curtail its aggressively hawkish stance without seeing much more downside in asset prices,” according to a message shared with The Block by Genesis head of derivatives Joshua Lim. “We will possibly see a relief rally going into the FOMC on Wed.”

Investor and noted crypto bull Su Zhu said Monday that he underestimated the degree to which macro “contagion” would drag crypto prices. 

“I was undeniably wrong about how much crypto could fall from macro contagion,” he said. “I remain bullish on the space as a whole and think it is the most important mega-trend of our times.”