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Bitcoin briefly drops to its lowest level in 3 months as risk assets proceed to get crushed

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Ether has hugely outperformed bitcoin since each cryptocurrencies formed a bottom in June 2022. Ether’s superior gains have come as investors anticipate a significant upgrade to the ethereum blockchain called “the merge.”

Yuriko Nakao | Getty Images

Bitcoin fell to its lowest level in three months on Monday as investors dumped risk assets amid expectations of upper rates of interest.

The world’s largest cryptocurrency dropped as much as about 5% to hit an intraday low of $18,276, its lowest level since June 19. It was last down 2.9% at $19,166.00. Bitcoin is down 7.2% this month and on pace for the second straight negative month after plunging 15% in August.

“Regulatory pressure, rising base rates, and inflation are pressing heavily on riskier asset classes, especially crypto, and are thus forcing liquidations, reducing capital available for investment, and increasing concerns over undefined regulatory controls,” said Sadie Raney, co-founder and head of operations at Strix Leviathan. “These forces may mute the general crypto complex until the economic system stabilizes and a regulatory framework becomes more clear.”

Ether also fell the same 5% to $1,281 apiece Monday, hitting its lowest level since July 15. It was last lower by 1.9% at $1,354.86. It’s currently down 17% this month, heading in the right direction to post its worst month since June.

Risk assets have been under massive pressure because the Federal Reserve is anticipated to keep on with its aggressive tightening schedule. The central bank is widely expected to approve this week a 3rd consecutive 0.75 percentage point rate of interest increase that might take benchmark rates as much as a spread of three%-3.25%. 

“Retail buyers have a protracted term outlook on bitcoin while institutional traders are treating digital assets like tech stocks and adopting a brief term mentality that is contributing to the selloff we’re seeing,” said Chris Kline, chief revenue officer and co-founder of Bitcoin IRA. “The tightening policy on the Fed is strengthening the dollar and is weighing down risk assets, overall.”

So-called “whales” — institutions, miners, or other holders of enormous amounts of bitcoin, typically with greater than 1,000 bitcoins in a wallet — have been hedging the macro condition and selling their coins since June, in accordance with Julio Moreno, senior analyst at blockchain analytics firm CryptoQuant.

That is evidenced by the increasing amount of coins being sent to exchanges and dumped onto retail investors, who imagine bitcoin is finding a bottom at these levels, though it actually has further to go, he said.

CryptoQuant data shows bitcoin bottoming at between $10,000 and $14,500 this cycle.

— CNBC’s Gina Francolla contributed to this report.

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