Bitcoin Plunges Most in 2 Months Amid Stock Market Sell-off

Bitcoin dropped more than 7% on Thursday. The decline was in line with a broad fall in the prices of stocks and bonds.

AccessTimeIconMay 5, 2022 at 4:38 p.m. UTC
Updated May 11, 2023 at 6:22 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Just one day after crypto and traditional markets soared on Federal Reserve Chairman Jerome Powell’s comment that the U.S. central bank wasn't likely to raise interest rates by more than 50 basis points (0.5 percentage point) at coming meetings, the dynamics of financial markets quickly changed.

Bitcoin (BTC), the largest cryptocurrency by market cap and the most affected by macroeconomic factors, dropped 7.3% Thursday to a 24-hour low of $36,640, according to data from TradingView. That was the lowest price since Feb. 24 and marked the biggest one-day decline since March 4.

“Yesterday's FOMC saw a rate hike alongside more concrete balance sheet contraction talk – things that don't bode well for markets," said Joe DiPasquale, CEO of BitBull Capital, a cryptocurrency fund of hedge funds. FOMC stands for the Federal Open Market Committee, the Fed panel that sets monetary policy.

"Even though there was an initial surge in BTC, it is not isolated from these macroeconomic changes, and today's price action reflects that," DiPasquale said.

"The Nasdaq is down over 5% and central banks are adding value to fiat, especially the dollar," said Bob Iaccino, chief strategist at Path Trading Partners and co-portfolio manager at Stock Think Tank.

Bitcoin’s drop came as the S&P 500 skidded 3.8% and Nasdaq Composite Index lost 4.9%, reflecting the elevated correlation between the two indexes and bitcoin.

Paul Hickey, co-founder of Bespoke Market Intelligence, called Thursday’s market sell-off a “reality check” on CNBC, and Jason Deane, an analyst at Quantum Economics, said it is a "text book capitulation" after Powell on Wednesday shut down rumors that the Fed might raise interest rates by 75 basis points in one of its upcoming meetings. The comments sent stocks and crypto soaring in a relief rally.

But inflation at its fastest pace in four decades remains a nagging concern, and the Fed’s approach to tackle the issue is still hawkish at a time when doubts are growing whether the U.S. central bank can engineer a proverbial "soft landing" – cooling the economy just enough to ease inflationary pressures without causing an outright recession.

The yield on the 10-year U.S. Treasury pushed above 3%, its highest level since 2018, adding to the economic headwinds by increasing borrowing costs for everything from mortgages to corporate loans and commercial real estate.

UPDATE (May 5, 17:08 UTC): Adds additional comments.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.

Helene Braun

Helene is a New York-based news reporter at CoinDesk, currently covering the criminal trial of infamous crypto mogul Sam Bankman-Fried. Helene is a recent graduate of New York University's business and economic reporting program and has appeared on CBS News and Nasdaq TradeTalks. She holds BTC and ETH.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.