The value of the entire cryptocurrency market also fell below $1 trillion as digital coins across the board saw a sell-off.
Bitcoin was trading around $18,812.36 at 03:50 a.m. ET, down more than 5%, according to CoinDesk. Ether, which has far outpaced bitcoin’s gains in recent months, was down more than 8% at $1,518.59.
Central banks around the world are battling rampant inflation with tightening monetary policy. The U.S. Federal Reserve has undertaken a series of interest rate hikes totaling 2.25 percentage points. Markets are expecting further interest rate rises.
Bitcoin has traded in correlation to stocks and so if they fall, in general, so does the cryptocurrency.
“The macro environment also continues to prove difficult with the dollar continuing to put in highs. This impacts all risk assets as we can see,” Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, told CNBC.
“If we see the dollar start to move back down, then we should be able to get risk assets such as bitcoin move back up again.”
The crypto market has been battered this year with nearly $2 trillion wiped off its value since its peak in November. Bitcoin is about 60% off its record high of $68,990.90 that was hit in November.
The sell-off has been caused by a tough environment for risk assets as well as crypto-specific issues including collapsed projects and bankruptcies that has spread across the industry.
Ethereum merge in focus
Bitcoin has been trading within a tight range of between $18,000 to $24,000 since June. Luno’s Ayyar said that in forming a bottom, “bitcoin typically likes to go back and test previous lows to see if they hold as support.”
He said that unless bitcoin falls below $17,500, then the market is likely consolidating within the $18,000 to $24,000 range.
In the meantime, ether and so-called altcoins, or alternative coins, have managed to rise further than bitcoin. Ether has outpaced bitcoin since both cryptocurrencies hit a low in June.
Ether is the native cryptocurrency on the Ethereum network. Ethereum is planning a huge upgrade this month — known as the merge — that proponents say will make the network more efficient.
“Ethereum hit yearly highs against the bitcoin pair in anticipation of the merge,” Ayyar said. ” Hence there has been a lot more interest and activity in the Altcoin space, while Bitcoin consolidates.”