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Bitcoin Price Hits Late-2020 Levels as Crypto Market Suffers Fresh Selloff

HONG KONG — This year’s route in bitcoin deepened, with the world’s biggest cryptocurrency dropping below $ 26,000 amid a broader selloff fanned by concerns about rising US interest rates.

Digital currencies fell over the weekend and dropped further on Monday morning in Asia, after a fresh inflation shock heightened investors’ fears that the Federal Reserve could be forced to act more aggressively to tame surging prices.

As turbulence rippled through the crypto market, a widely used lender to the industry froze customer withdrawals. Celsius Network LLC said it was pausing all withdrawals, swaps between cryptocurrencies and transfers between accounts “due to extreme market conditions.”

Data Friday showed US consumer-price inflation stood at 8.6% in May, surpassing estimates, to reach its highest level in more than four decades.

The figures helped fuel a US stock-market pullback on Friday, which spread to Asian share indexes on Monday.

By early afternoon in Hong Kong on Monday, bitcoin was trading at $ 25,588. That was down 9.6% from its 5 pm ET level Friday. If that level holds through New York trading hours, that would mark the lowest end-of-day level since December 2020.

Ethereum, another major cryptocurrency, fell to about $ 1,357, down about 19% from late Friday.

Cryptocurrencies have been moving in tandem with traditional markets in recent weeks, with a tendency to echo other risky assets such as stocks, albeit with even higher volatility.

“Risky and highly liquid cryptocurrencies are usually the first to be sold in a market selloff,” said Jeff Mei, chief marketing officer at blockchain technology solutions provider ChainUp.

The market has started to take Federal Reserve Chairman Jerome Powell’s comments last month “at face value when he said… the Fed must move more aggressively if there are no clear signs that inflation is coming down,” said Markus Thielen, chief investment officer of IDEG Asset Management Ltd.

Mr. Thielen pointed to the widely watched University of Michigan consumer-sentiment survey, which showed the public’s expectation of inflation five years from now jumped to a reading of 3.3% from 3% in May, the highest level since 2008.

“The public is losing confidence that the US central bank will be able to push inflation lower,” he said. It would likely take a shift in Fed policy for cryptocurrencies to become very attractive again, Mr. Thielen added.

Bitcoin has now fallen more than 60% from its all-time high in November, when it hit $ 67,802. That has contributed to a near- $ 2 trillion wipeout in the broader market. Crypto’s total market capitalization, which peaked in November at $ 2,968 trillion, stood at $ 1,031 trillion in Asian hours Monday, data from CoinMarketCap showed.

The latest fall in crypto prices also came after Treasury Secretary Janet Yellen last week called cryptocurrencies a very risky investment for most retirement savers.

Write to Elaine Yu at elaine.yu@wsj.com

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