Bitcoin Falls, Taking Cue From Stocks, Following Fed Official's Hawkish Comments

The world's most popular cryptocurrency, Bitcoin, slumped and remained below $44,000 Friday early morning taking cue from the fall in U.S. stocks Thursday following hawkish remarks by a Federal Reserve official.

As of 2.29 a.m. ET, Bitcoin was down 1.59% at $43,307, showed Coinmarketcap data.

Federal Reserve Bank of St. Louis President James Bullard commented on the surprisingly high inflation and said he supported raising interest rates by a full percentage point by July.

His comments came after the U.S. Labor Department on Thursday reported that the consumer price index (CPI) for January hit 7.5%.

CoinDCX, an Indian crypto exchange, noted that the hawkish stance led to risk assets correcting across the board, from equities to crypto, while the 10-year treasury yield topped 2% for the first time since 2019.

"For as long as inflation remains high, any further upside for stock and crypto could potentially be limited," CoinDCX Research Team told International Business Times. "That said, we are cautiously optimistic on the structural bull market remaining intact, particularly for crypto, given the sheer volume of funds that have continued to pour into the sector, notwithstanding the seemingly dull economic outlook."

Last month, the International Monetary Fund (IMF) pointed out a clear correlation between stocks and the Bitcoin movement. Writing in a blog, IMF economists said that easy liquidity brought about by central bank responses to the pandemic and greater investor risk appetite saw a parallel surge in Bitcoin and stock prices.

"Returns on Bitcoin did not move in a particular direction with the S&P 500, the benchmark stock index for the United States, in 2017–19," the economists said. "The correlation coefficient of their daily moves was just 0.01, but that measure jumped to 0.36 for 2020–21 as the assets moved more in lockstep, rising together or falling together."

Crypto exchange WazirX remained optimistic that the top coin will soon bounce back to its all-time high of $69,000, which it touched in November.

"On the weekly chart, Bitcoin can be seen bouncing off from the support levels and progressing ahead. The next resistance for BTC is expected at $50,700, and immediate support is expected at $39,300 level," the WazirX research team told IBT.