Bitcoin drops below $32,000 amid broader market sell-off

The moves follow a painful day on Wall Street in which the blue-chip Dow Jones Industrial Average lost more than 1,000 points on Thursday and the tech-heavy Nasdaq fell 5%. Both losses marked the worst single-day drops since 2020 and followed big rallies in the previous session. The Dow and Nasdaq fell again on Friday.

Bitcoin, whose price action remains highly correlated to stock market moves, has traded in a tight range all year as it struggles to reclaim its highs of late 2021 amid the broader market sell-off.

“That correlation will over time break down, you’ve already seen the beta the breakdown, i.e. [if] the Nasdaq falls 3% crypto doesn’t fall 9% like it would have last year,” Michael Novogratz, CEO of Galaxy Digital, told CNBC’s “Squawk Box Friday. “But I do think there’s more pain to come.”

Interest rate hikes and tightening of monetary policy have sparked fears that the U.S. economy could go into a recession. On Wednesday, the U.S. Federal Reserve raised its benchmark interest rate by half a percentage point, as expected.

The stock market rallied immediately afterward, amid comments by Fed chair Jerome Powell who said a bigger rate hike of 75 basis points isn’t currently under consideration. Nevertheless, by Thursday investors mentally prepared for increased tightening this year and erased all of the Fed rally’s gains.