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Bitcoin Falls to Below $40,000 as Wall Street in ‘Full De-Risking Mode’

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Bitcoin
fell below $40,000 Friday on renewed worries of an imminent Russian invasion of Ukraine and the prospect of higher U.S. interest rates this year. 

Bitcoin, the world’s largest cryptocurrency, was at $39,781, down 4.9% over the past 24 hours, according to CoinDesk. It has fallen 12.7% in 2022.

Ether,
the second-largest digital currency, has declined 6% over the past 24 hours to $2,796.

“Wall Street has gone full de-risking mode and Bitcoin is paying the price,” said Edward Moya, an analyst at broker Oanda. “Fears over geopolitical concerns and potentially aggressive central bank tightening has cryptos across the board in free fall.” U.S. stocks fell sharply on Thursday and the

Dow Jones Industrial Average
had it worst day of the year as Russia continued to build up troops on the Ukraine border. Wall Street traded lower again Friday.

Moya added that a Russian invasion of Ukraine invasion “would keep crypto selling pressure going another 10%-15% over the short-term.”

He said the outlook for Bitcoin remains “mostly bullish” but added that if “long-term growth prospects start taking a bigger hit from aggressive [Federal Reserve] tightening, institutional investors might scale down their bets.”

Analysts at Fundstrat agreed that tensions between Russia and Ukraine were “driving increased selling pressure” across crypto markets, and Yuya Hasegawa, an analyst at Bitbank, said the situation at the Ukraine border “can make or break Bitcoin’s price.” Hasegawa also pointed to the possibility of a rate hike of 50 basis points at the Fed’s next meeting in March.

The minutes from the Federal Reserve’s meeting in January, released Wednesday, showed that officials are open to the possibility of faster interest-rate increases later this year, as well as other policy-tightening measures, if inflation continues to run high.

During the central bank’s Jan. 25-26 meeting, Fed Chairman Jerome Powell reinforced expectations the Fed would begin raising interest rates in March. While Fed officials expect inflation to moderate throughout 2022, more aggressive action might be needed if prices don’t move lower.

Write to Joe Woelfel at joseph.woelfel@barrons.com

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