Bitcoin and other digital currencies have plummeted as tighter monetary policy drained liquidity and took a toll on risky assets.

The largest cryptocurrency by market value is tumbling after the Federal Reserve decision to increase interest rates by half a percentage point.

As of 1:08pm on Friday, UAE time, the largest digital currency in terms of market value was trading at $36,266.22, falling by 8.22 percent over the last 24 hours, according to CoinMarketCap. Ethereum and BNB were down 6.96 percent and 5.19 percent, respectively.

The global crypto market capitalisation dropped 7.31 percent to $1.67 trillion compared to the previous day. The Bitcoin Dominance Index fell 0.4 percent to 41.5 percent.

Bitcoin had fallen to its lowest level since late January on Thursday, losing more than $3,000 in just a few hours.

“The pressure came from the US stock and bond market, where traders furiously pricing in sharp tightening of the Fed’s monetary policy,” said Alex Kuptsikevich, Senior Market Analyst at FxPro.

“The decline in BTC was the highest in the last 3.5 months and was observed simultaneously to the sell-off in the US stock market. Expectations of increasingly steep policy tightening are draining liquidity, primarily hitting risky assets, from equities to commodities to cryptocurrencies.”

The Federal Reserve on Wednesday raised interest rates by a half-percentage point to a range of 0.75 percent to 1 percent in a bid to get a hold of inflation. The increase is the biggest in 22 years.

(Reporting by Cleofe Maceda; editing by Seban Scaria)