Cryptocurrency prices plummeted Thursday as investors looked to the near impact of the Federal Reserve's interest rate hikes.
Bitcoin was down 8.8% to $36,308, at last check, well off its record high of $69,044.77 in November. Ethereum lost 6.8% to $2,744 and dogecoin was off 4.53% to $0.129068.
'Bitcoin is the Solution'
Over on Wall Street, the Dow Jones Industrial Average finished down 1,063 points, or 3.1% to 32,997, while the S&P 500 lost 3.56% and the tech-heavy Nasdaq fell 5%.
Cryptocurrencies have been moving in tandem with stocks, particularly the tech sector.
"There’s carnage across financial markets and crypto is no exception," Luzi Ann Santos, markets expert and editor with Finder. "On a day when you have the Nasdaq down almost 5% and the S&P 500 slumping 3.6%, you’d have a lot of fund managers scrambling to sell assets that could help them cover losses."
"That means booking whatever gains they’ve had in the crypto market to cover those losses in the stock market," Santos added, "and that’s why we’re seeing red across the board."
Michael Saylor, founder and CEO of MicroStrategy (MSTR) - Get MicroStrategy Incorporated Report and a bitcoin evangelist, stuck by the cryptocurrency, tweeting "the pundits see the problem, yet proffer no solutions. #Bitcoin is the solution."
'A Peculiar Situation'
MircoStrategy posted a first quarter net loss of $130.8 million compared with $110 million in the same period in 2021.
The Fed lifted its Fed Funds rate by 50 basis points, to a range of 0.75% to 1%, its largest rate hike in more than two decades.
The central bank also confirmed plans to reduce its $8.9 trillion balance sheet, with $47.5 billion in sales starting on June 1 with a cap its monthly asset sales at $95 billion, comprised of $60 billion in Treasury bonds and $35 billion in mortgage bonds.
"The Fed now finds itself in a peculiar situation where it’s forced to implement aggressive policy tightening at a time when economic indicators are beginning to soften," said Peter Essele, head of portfolio management, Commonwealth Financial Network. "The Fed has indicated its preference for a soft landing; however, if history is any indication, the Fed often misses the mark and things end with a thud."
Essele added that "the performance of recent equity markets would suggest that investors aren’t too convinced the Fed can engineer a parachute landing this time around with the economy."