Bitcoin crashes 10% to a six-month low below $38,000, as cryptocurrencies follow tech stocks lower

• Bitcoin tumbled to a six-month low below $38,000 on Friday, as a broad crypto sell-off intensified.
• Investors have dumped both cryptocurrencies and tech stocks as they prepare for the Fed to hike interest rates in 2022.

Bitcoin plunged as much as 10% to a six-month low below $38,000 on Friday as cryptocurrencies dropped across the board, following tech stocks lower.

Bitcoin was down 9% to $38,274 on the Coinbase exchange as of 9.05 a.m. ET. It had earlier fallen to $37,704, the lowest price since late July and early August 2021, before paring some of its losses.

The biggest and oldest cryptocurrency has slumped more than 20% over the last month to stand far below November's record high of close to $69,000.

Meanwhile, ethereum was down 12.4% to $2,788 Friday. It has fallen 30% over the last month, down sharply from 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.

"Bitcoin is getting pummeled, hit by another wave of risk aversion in the markets," said Craig Erlam, senior market analyst at trading platform Oanda. "It doesn't look good for the cryptocurrency."

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."

Read more: A 21-year veteran trader breaks down an options trade designed to help investors 'sustain risks long enough to see the light of profitability' — and explains why bitcoin could continue to move in tandem with tech stocks

Thursday's proposal by Russia's central bank to outlaw the mining and trading of cryptocurrencies was another factor weighing on prices, analysts said.

The broad cryptocurrency complex was a sea of red Friday. Binance coin, the third-biggest token, was down 11%; cardano was 13% lower; and solana had dropped 15%.

Even bitcoin bulls have become concerned about the impact of Fed policy and bond yields on the crypto market.

Galaxy Digital founder and crypto billionaire Mike Novogratz said this week: "As long as rates go higher, we will see pressure on Nasdaq and crypto." SkyBridge Capital boss Anthony Scaramucci has said his investment firm is not buying the dip this time around, despite recommending it in the past.

However, Aslam said investors are likely to buy into the weakness at some point, with many seeing digital assets as the currencies of the future.

"Smart money and other institutions are certainly going to take advantage of the current price action, and they are likely to bag some great bargain."