Premarket Stocks: Bitcoin’s Plunge Is Another Sign of Market Fear

When markets retreat, investment managers discharge their riskiest assets first. That makes bitcoin vulnerable, says Jeroen Blokland, founder of research agency True Insights.

Bitcoin has done what you would expect it to do [to do] as soon as stock sentiment drops,” he said.

The sell-off was largely driven by institutions taking profits on bitcoin before the end of the year due to a spike in uncertainty, Sotiriou said.

“This crash in the market definitely shows us that bitcoin is not completely decoupled from global markets,” he told me. “It’s not yet big enough to hold its own.”

But questions about the Omicron variant have terrified investors and led many major players to try to lock in profits for 2021. The S&P 500 is down more than 3% in the past two weeks, but is still close to 21% higher so far this year.

Blokland said he doesn’t think this means the end of the Covid-era bull market. One reason for bitcoin’s collapse, he added, was thinner trading on weekend days.

“I don’t think the whole sentiment-driven rally has ended,” he said.

But the sell-off serves as a reminder to professional investors that bitcoin is not isolated from market fears, Blokland continued. It may be even more sensitive, as the asset class is three to four times more volatile than stocks.

“The higher the volatility, the higher the withdrawals will be,” he said.

Evergrande shares plunge to new record low

Before Bell readers may wonder: Are investors still concerned about Evergrande, the heavily indebted Chinese real estate developer whose potential bankruptcy was under scrutiny a few months ago?

The answer is yes.

Shares of the company plunged to a new record low on Monday as the company again indicated that it is in serious trouble, reports my CNN Business colleague Laura He.

This just came in: The company, which has roughly $300 billion in debt in total, warned late Friday that it may not have enough money to meet its financial obligations. It faces an immediate test of its ability to repay creditors Monday with the expiration of a 30-day grace period on interest payments on its dollar-denominated bonds.

In a series of seemingly coordinated statements, three Chinese regulators — the People’s Bank of China, the Banking and Insurance Regulator and the Securities Regulator — said any spillover risk from Evergrande to the real estate market, homeowners and the wider financial system can be controlled.

The verbal intervention appears to be aimed at limiting wider contagion – a long-standing concern given the disproportionate role of the Chinese real estate sector in its overall economy.

Still, the collapse of Evergrande stocks and other real estate stocks weighed on Hong Kong’s benchmark Hang Seng Monday. It fell 1.8%, also on large losses in Chinese technology stocks, which collapsed in New York on Friday following Didi’s abrupt decision to leave Wall Street just five months after it went public there.

A Wall Street bank makes an Omicron call

Goldman Sachs had outlined several scenarios for how it could turn out, including a “false alarm” scenario where Omicron has no significant impact on global infections, and an “upside” case where the variant is more contagious but causes much less serious illness. actually stimulate the economy.

Still, it now sees the “downside” option, in which Omicron spreads faster than the Delta variant, but “causes a similarly serious disease,” as most likely. Over the weekend, Goldman economist Joseph Briggs said this was the new baseline and lowered the bank’s expectations for US economic growth.

The latest: Goldman Sachs now forecasts that the US economy will grow by 3.8% next year, down from a previous forecast of 4.2%.

It sees that the Omicron variant has three main effects. It could delay the reopening of the services sector “if state governments implement policies to curb the spread of viruses or if consumers become less willing to participate in normal economic activities.” It could exacerbate supply chain problems. And it could delay the labor market comeback.

But Briggs doesn’t think the arrival of the variant will cause the Federal Reserve to change course, and still expects the central bank to announce a faster withdrawal from its bond-buying program at its meeting next week.

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