Bitcoin price plunges 11%. What's going on?

Cryptos are coming under pressure amid fears of fast rising interest rates.

| More on:
Red arrow crashing in the ground with a Bitcoin token next to it.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Bitcoin price falls the most since Russia's invasion of Ukraine 
  • Crypto investors are worried about fast rising interest rates 
  • Bitcoin's biggest price moves tend to come when US markets are open 

The Bitcoin (CRYPTO: BTC) price cratered overnight, falling as much as 11% to hit US$35,612.

At time of writing, the world's biggest crypto by market cap is down 9% over the past 24 hours, currently worth US$36,509.

The last time the Bitcoin price fell as much in a single day was when Russian troops crossed into Ukraine, sending global markets into turmoil in late January.

And it's not just Bitcoin. CoinMarketCap tells us that all but one of the top 100 cryptos by market cap are well into the red today (stablecoins aside).

So, what's going on?

Bitcoin price succumbs to rate fears

The finger of blame looks to be pointing squarely at surging global inflation figures. Figures that are forcing central banks the world over to begin ratcheting up interest rates more aggressively than most analysts had expected.

The US Federal Reserve restrained itself this week with a 0.50% rate hike rather than the feared 0.75%. But investors are all too aware that further rises are just around the bend from the Fed and other central banks the world over.

Following a big relief rally on Wednesday, yesterday (overnight Aussie time) US markets tanked. The tech-heavy Nasdaq led the way down, plummeting 5%.

And as we've seen throughout this year, the Bitcoin price tends to move in close alignment with risk assets like high growth tech shares.

What the experts are saying

Commenting on the crypto rout, Jason Lau, chief operating officer of Okcoin exchange said (quoted by Bloomberg), "Investors are jittery about the Fed continuing to raise interest rates after yesterday's 50 bps hike. The potential of additional rate hikes makes the trajectory of the global economy uncertain."

Digital asset fund manager Valkyrie Investments head of research, Josh Olszewicz added:

Bitcoin has become increasingly correlated with US trading hours and US traditional market indices, likely due to a combination of increasing US institutional presence as well as the absence of China after the sweeping bans last year.

Since March this year, most of the large selloffs in Bitcoin have kicked off during US market open, potentially suggesting a market participant continues to sell every bullish rally.

Following the latest round of selling, the Bitcoin price is down 23% so far in 2022.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin. The Motley Fool Australia has positions in and has recommended Bitcoin. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Cryptocurrencies

Bitcoin ETF digital illustration.

Bitcoin ETF hits the ASX. Here's what you need to know

History is being written on the ASX today as it welcomes its first Bitcoin ETF.

Read more »

Concept image of Bitcoin and hand using laptop.

Buying Bitcoin? Here's why Block's Jack Dorsey says AI will drive global adoption

Moving forward, Block plans to reinvest some of its monthly profits into Bitcoin.

Read more »

A man holding a mobile phone walks past some buildings

The Betashares Crypto Innovators ETF (CRYP) is up 37% in a month. Is it too late to buy?

Looking at the CRYP ETF? Here's my take on whether it's too late to buy.

Read more »

Bitcoin ETF digital illustration.

Why is the BetaShares Crypto Innovators ETF (CRYP) surging on Thursday?

Some massive Bitcoin news is lifting this ETF today.

Read more »

A woman holds a bitcoin token in her hand as she smiles at the camera in the background.

Bitcoin ETF approved. When is it coming to Australia?

Crypto bulls will be celebrating this milestone moment.

Read more »

person dancing in bitcoin spectacles wearing a gold outfit with hands up.

Bitcoin price rockets to 21-month highs. Here's why

The Bitcoin price is now up more than 174% in 12 months.

Read more »

BTC spelt out on wooden blocks with a red sign going down.

Bitcoin price sinks from 21-month high as ETF rumours swirl

What's going on with this cryptocurrency this week?

Read more »

person dancing in bitcoin spectacles wearing a gold outfit with hands up.

Up 145% in a year, the Bitcoin price just smashed through 18-month highs!

After a horror year in 2022, the Bitcoin price has come roaring back in 2023.

Read more »