Bitcoin plunges to below $40,000 for first time since August as cryptos track Wall Street's tech rout

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Dado Ruvic/Reuters

Bitcoin slid below $40,000 and ethereum dropped to under $3,000 as a broad sell-off intensified Friday, with investors dumping cryptocurrencies along with tech stocks as they prepare for the Federal Reserve to hike interest rates.

Bitcoin was down 6.6% to $39,140.16 on the Coinbase exchange as of 3.45 a.m. ET. The biggest and oldest cryptocurrency has slumped nearly 20% over the last month to stand far below November's record high of close to $69,000.

Meanwhile, ethereum was down 7.8% to $2,894.41. It has fallen almost 30% over the last month, having hit a record high of close to $5,000 in November.

Investors have been rapidly selling both cryptocurrencies and speculative technology stocks in anticipation of the Fed withdrawing its support for markets and the economy in 2022. Traders think the central bank will raise rates four times this year, an expectation that has rapidly pushed up bond yields.

Higher bond yields have in turn made crypto and unprofitable tech companies look unattractive, given that neither offer yields of their own. Instead, investors have pivoted towards so-called value stocks in sectors such as energy and finance that are more closely linked to the health of the economy.

«The pessimism continues to grow among investors and traders when it comes to riskier assets and this is chiefly influencing the price of equities and bitcoin,» Naeem Aslam, chief market analyst at AvaTrade, said.

«From the technical price perspective, the bitcoin price has violated the key support level of $40,000, which was already tested a few times before. Now all eyes are on the next two important price levels: $35,000 and the most important one is $30,000.»

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