Bitcoin and other cryptocurrencies fell sharply on Friday following the release of hawkish minutes from the Federal Reserve's December meeting.
Bitcoin's weeks-long decline continues, plunging below $42,000 to depths not seen since September.
The largest cryptocurrency fell about 5% to $41,008, representing a roughly 40% loss from its Nov. 10 high at $69,000.
Ether, the second largest cryptocurrency, fell as much as 8.5% to its lowest level since September 30, while Solana sank more than 3% to $151.98.
The decrease in cryptocurrency coins comes as the U.S. central bank indicated that officials anticipate a rapid increase in interest rates in 2022, according to The Wall Street Journal.
When interest rates rise, growth assets such as technology companies typically take a blow, as investors become less interested in future earnings when yields are higher. This mentality has spread to cryptocurrencies, which are viewed as riskier investments.
Bitcoin's decline might be a double whammy for Bitcoin miners. To begin, they earn revenue in Bitcoin by providing mining services to the network.
As a result, when Bitcoin declines, their revenue declines as well, with no real balance to their expenditures. Given the large fixed costs associated with mining, analysts expect to see a significant decline in net income if the present Bitcoin trend continues.
"The Federal Reserve's intention to decrease its balance sheet in the first quarter of this year is the fundamental reason for bitcoin's sell-off," Fundstrat strategists wrote Thursday in a note.
Bitcoin gained about 60% last year, surpassing other asset classes on the strength of a narrative centered on institutional acceptance, inflation protection, and investment diversification. It has struggled in recent weeks, though, as global markets have been unpredictable.
Yuya Hasegawa, a cryptocurrency market analyst at the Japanese bitcoin exchange Bitbank, predicted that bitcoin might fall lower, possibly to $40,000, if the upcoming December nonfarm payrolls data indicates significant employment growth.
Meanwhile, as the Central Asian nation of Kazakhstan descended into upheaval this week, the world's second-largest bitcoin mining hub had an internet outage, dealing another blow to miners looking for a permanent and stable home.
After dismissing his administration and soliciting Russian paratroopers' assistance in containing the deadly violence, Kazakh President Kassym-Jomart Tokayev ordered the country's telecom operator to suspend internet service.
This stoppage affected around 15% of the world's bitcoin miners, according to Kevin Zhang of digital currency business Foundry, which assisted with the importation of more than $400 million in mining equipment into North America.
