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Bitcoin bounced into positive territory Monday after initially continuing its slide from last week.

On Monday, bitcoin fell to $32,982.11, its lowest point since July, according to Coin Metrics, but the largest cryptocurrency by market cap was up 5.6% in afternoon trading, to $37,183.25, as broader equities reversed course and ended the day higher. Earlier in the session, the Dow fell as much as 1,115 points and the S&P 500 briefly fell into correction territory.

Ether plunged to as low as $2,176.41, its lowest since July, according to Coin Metrics. It last rose 1.1% to $2,444.85. Bitcoin and ether are about 45% and 49% off their respective all-time highs.

Cryptocurrencies have been moving in tandem with stocks, which have continued to fall since the beginning of the year and just came off of their worst week since March 2020. Investors have been selling risk assets like technology stocks, as they prepare for tighter monetary policy from the Federal Reserve.

"It's possible that macroeconomic concerns, such as the Fed's response to inflation rates, have facilitated more de-risking activity in general," said Juthica Chou, head of OTC options trading at Kraken. "The recent price drop, coupled with high volatility, could be leading to further selling as participants look to reduce risk."

Investors also are assessing the impact of further regulation on the cryptocurrency market. Last week, Russia's central bank proposed banning the use and mining of cryptocurrencies.

Given current market sentiment, bitcoin is likely to test the $30,000-$32,000 range, according to Vijay Ayyar, Luno's vice president of corporate development and international expansion. If the cryptocurrency holds above $30,000 for as long as one week, there could be a base formed at those levels before the market moves higher, he said. However, it could be some time for the market to turn bullish given the lack of confidence across the spectrum, he added.

Several other analysts have said they see $30,000 as the next level of support for the cryptocurrency to test. However, analyst John Roque of 22V Research said bitcoin could fall even further. He also has been using $30,000 as a target but noted the median historical bear market for bitcoin is down 78%.

"A 78% decline from the bitcoin high of nearly $69,000 would imply a potential downside figure of about $15,000," he said in a note Monday. "It's probably safe to say that not one bitcoin bull has that figure in their model. To be sure, we don't either but we think it's worth keeping in our back pocket in case we need it."

Investors are also grappling with rising inflation. Bitcoin proponents have long suggested the digital coin is a hedge against inflation, but that theory has not held up for many newer investors. As institutional interest poured into bitcoin last year, there are more short-term investors in the crypto market valuing bitcoin like a tech stock than ever before. Analysts have said there's concern a more hawkish Fed could take the wind out of the crypto market's sails.

"Looking forward, our most immediate concern is how equities markets respond to this week's Fed meeting, especially after having just endured their worst week since the global onset of Covid," said Leah Wald, CEO at digital asset investment manager Valkyrie Funds.

"A consolidation in stocks would lead to a risk-on environment where traders are more willing to take on additional risk assets such as bitcoin," she added, "since digital assets have become increasingly correlated to equities as more companies continue to add bitcoin to their balance sheets. Volatility is likely to be a feature of bitcoin for at least the short term, as traders figure out where market sentiment isfollowing this week's Fed meeting."

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Bitcoin climbs into positive territory after falling below $33,000 to a new low - CNBC