Bitcoin Drops As U.S. Stocks Rally Ahead Of Biden's Budget Announcement

Bitcoin slumped on Friday to its lowest level of the week despite hopes of more inflation-boosting U.S. stimulus to come.

The largest cryptocurrency dropped as low as $35,184 as of 12:53 pm WAT before slightly retracing above $36,000 according to data from Coindesk.

The cryptocurrency has lost 37 percent in May, which if sustained would be its worst monthly performance since September 2011.

United States President Joe Biden is set to release his first full budget today, seeking $6 trillion in federal spending for the fiscal year 2022 and $8.2 trillion by 2021.

The proposal shows the Biden administration remains undeterred by recent inflation fears and is unlikely to close the liquidity tap anytime soon, having already pumped trillions of dollars into the system to counter the economic effects of the coronavirus pandemic since March 2020.

While this is supposed to be great news for bitcoin, which is touted to function as a digital store of value, the leading cryptocurrency is still under selling pressure after buyers failed to establish a foothold above the $40,000 mark in the previous trading day. Bitcoin took the world by storm when it rallied from $5,000 to $60,000 in the last 12 months after the U.S government began its first fiscal stimulus rollout.

However, the prospect of more liquidity is pushing stocks higher. The pan-European Stoxx 600 index is trading 0.43% higher at new record highs above 445 points, according to Investing.com. Futures tied to the S&P 500 are also hinting at a positive start to trading on Friday with a 0.5% gain.

Smaller coins, which typically rise and fall in tandem with bitcoin, also slumped. The second-largest digital token ether fell as much as 11% to a four-day low.