Bitcoin Revisits Late-2020 Levels as It Suffers Fresh Selloff

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HONG KONG—This year’s rout in bitcoin deepened, with the world’s biggest cryptocurrency dropping toward $25,000 amid a broader selloff fanned by concerns about rising U.S. interest rates.

Digital currencies fell over the weekend and dropped further on Monday morning in Asia, after a fresh inflation shock heightened investors’ fears that the Federal Reserve could be forced to act more aggressively to tame surging prices.

Data Friday showed U.S. consumer-price inflation stood at 8.6% in May, surpassing estimates, to reach its highest level in more than four decades.

The figures helped fuel a U.S. stock-market pullback on Friday, which spread to Asian share indexes on Monday.

By late morning in Hong Kong on Monday, bitcoin was trading at $25,176. That was down 13.8% from its 5 p.m. ET level Friday. If that level holds through New York trading hours, that would mark the lowest end-of-day level since December 2020.

Ethereum, another major cryptocurrency, fell to about $1,332, down 20.6% from late Friday.

The market has started to take Federal Reserve Chairman

Jerome Powell’s

comments last month “at face value when he said…the Fed must move more aggressively if there are no clear signs that inflation is coming down,” said Markus Thielen, chief investment officer of IDEG Asset Management Ltd.

Cryptocurrencies have been moving in tandem with traditional markets in recent weeks, with a tendency to echo other risky assets such as stocks, albeit with even higher volatility.

Mr. Thielen pointed to the widely watched University of Michigan consumer-sentiment survey, which showed the public’s expectation of inflation five years from now jumped to a reading of 3.3% from 3% in May, the highest level since 2008.

“The public is losing confidence that the U.S. central bank will be able to push inflation lower,” he said. It would likely take a shift in Fed policy for cryptocurrencies to become very attractive again, Mr. Thielen added.

Bitcoin has now fallen more than 60% from its all-time high in November, when it hit $67,802.

The latest fall in crypto prices also came after Treasury Secretary

Janet Yellen

last week called cryptocurrencies a very risky investment for most retirement savers.

Meanwhile, Celsius Network LLC, a cryptocurrency lender, said it was pausing all withdrawals, swaps between cryptocurrencies and transfers between accounts “due to extreme market conditions.”

Write to Elaine Yu at [email protected]

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