Bitcoin tanks as correlation with stocks rises, Dow drops over 600 points

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Bitcoin plunged more than 5% on Friday, as the U.S. stock indexes fell, as the correlation between the two assets rises. 

The Russia-Ukraine war is approaching its third month, while Federal Reserve Chairman Jerome Powell added his support on Thursday to move faster on raising interest rates to fight inflation, with measures that would include a possible 50 basis point interest rate hike in May.

Bitcoin BTCUSD, -2.78% was trading at around $39,440, according to CoinDesk data. Ether ETHUSD, -1.50% plunged 5% to around $2,954.

The two-month rolling correlation between bitcoin and the S&P 500 index has risen to 0.53 on Friday, the highest level since Jan. 24, according to Dow Jones market data. 

“We generally have market headwinds across pretty much all macro. Stocks, gold, oil, crypto, all had a pretty rough week,” Chris Kline, chief operating officer and co-founder of Bitcoin IRA told MarketWatch in an interview. “There’s a general understanding that the free money party may be coming to an end,” Kline said. 

The Dow Jones Industrial Average plunged 673 points, or 1.9% to around 34,107 Friday afternoon.

Read: Why is the stock market falling? Dow drops more than 600 points as investors weigh Fed’s policy path.

Bitcoin has been trading in the range of $38,000 to $48,000 for the past month. “I would anticipate that we’re still gonna be in this range bound,” Kline said. “It’s happening across multiple markets.”

A slew of positive news around bitcoin’s adoption this week has failed to lift and sustain the cryptocurrency’s price. The Bahamas government will allow Bahamians to pay taxes using digital assets, according to a white paper released Wednesday that guides the nation’s digital assets policy until 2026. Meanwhile, Australian regulators have greenlit the first bitcoin exchange-traded fund in the country, which will start trading next week. 

Ken Jimenez has contributed to the article.