Bitcoin falls below $ 40,000; What was the reason?

The price of bitcoin fell below $ 40,000 again after several weeks of fluctuations. The crash comes when the US government recently warned that last month’s inflation, which will be published this afternoon, may be too high.

According to the Quinn Desk, the price of bitcoin this morning fell below $ 40,000 for the first time since March 16 (March 25) and reached $ 39,200 at its lowest daily level. The price has fallen by about 5.5 percent in the last 24 hours and at the time of writing each bitcoin is trading at $ 39,990.

Bitcoin falls below $ 40,000;  What was the reason?
1-day bitcoin price chart.

The significant decline comes as the majority of investors in international markets assess the risk of rising US bank interest rates, rising global inflation and restructuring of international trade following Russia’s invasion of Ukraine.

Armando Aguilar, director of research at the Ledn Institute, said macroeconomic factors were the main reason for investors’ fears these days.

The administration of US President Joe Biden warned yesterday that the March report on US inflation, due to be released today, could show a sharp rise in inflation. This could make the US Federal Reserve raise interest rates faster; Because inflation in the United States has already peaked in the last four decades and is somehow out of control.

The New York Institute for Digital Investment (NYDIG) said in a new report that “fears of rising bank interest rates and shrinking monetary policy in the United States remain a major problem for bitcoin investors.”

The bitcoin market, which has recently become unusually linked to the US stock market, is naturally affected by the US Federal Reserve’s plan to cut $ 95 billion a month from its $ 9 trillion balance sheet.

The move of the central bank to reduce its assets is in stark contrast to the policies adopted in 2020 and 2021 in order to develop traditional markets, grow the economy and improve the state of the country’s financial system; A policy that quadrupled the price of bitcoin in 2020 and jumped 59 percent in 2021.

Lucas Otumuro, a senior associate at IntoTheBlock, said traders now see the risk of shrinking balance sheets and shrinking US Federal Reserve monetary policy, which is being implemented simultaneously with several interest rate hikes. The interest rate is set to rise by 0.5% at each stage, while the US Federal Reserve has raised bank interest rates by only 0.25% at each stage of recent economic cycles.

Overall, Otamuro said, this could reduce the price of high-risk assets and increase the correlation between the performance of digital currencies and stocks.

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