Bitcoin’s voyage to the moon has once again encountered turbulence. The cryptocurrency on Friday morning fell below $42,000 for the first time since late September. It has dropped over 12% in the past 7 days, one of many cryptocurrencies to have tumbled in recent days. Ether, which held at around $4,000 for much of December, briefly dipped below $3,200 on Friday morning.
So, what gives?
It’s difficult to explain cryptocurrency price movements with definite pricision, but the market’s downward slide appears to be tied to the Federal Reserve. To combat rising inflation rates, the Fed may raise interest rates sooner than previously planned, according to minutes from a Federal Reserve meeting.
The prospect of rising borrowing rates impacted most markets, crypto or otherwise. The Nasdaq is down 3.3% since Wednesday, while the Dow Jones Industrial Index dropped just over 1%. Cryptocurrencies are notoriously volatile, so their swings are larger. The Bitcoin Fear and Greed Index, designed to measure market sentiment, is at its lowest level since last July.
Another factor that may be affecting Bitcoin price is ongoing unrest in Khazakstan. Since China cracked down on cryptocurrency mining in 2021, many moved their mining operations south to Khazakstan. More Bitcoin is now mined in Khazakstan than any other, with the sole exception of the US.
Following widespread protests over fuel prices, Khazakstan’s government shut down the internet, causing Bitcoin’s hashrate — a measure of how much computational power is being used to verify transactions and mint new Bitcoin — to fall 13%.