Bitcoin drops to six-month low as investors dump speculative assets

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Bitcoin fell to its lowest level in six months on Saturday, extending a sharp decline recorded in the previous session as the cryptocurrency market was swept by a powerful shift in investors away from speculative assets.

The price of the largest digital token by market value fell 4.3% in European Saturday morning to $35,127, the lowest level since July 2021. Bitcoin has now lost nearly a quarter of its value this year.

Other cryptocurrencies have also come under intense selling pressure, with an FT Wilshire index of the top five non-bitcoin tokens down 30% in the first month of 2022.

The cryptocurrency rout comes as investors sold shares in tech companies on the belief that the US Federal Reserve will act to rein in loose pandemic monetary policy to fight inflation. Global stock markets posted their biggest declines in more than a year this week as fast-growing companies that fueled the rally from the depths of the coronavirus crisis suffered intense falls.

Investors now expect the Fed, the world’s most influential central bank, to raise interest rates three to four times this year, pushing bond yields higher. Higher yields on lower-risk assets like US government bonds make the potential returns that can be earned through speculative investments like cryptocurrencies less attractive, analysts say.

Andrew Sullivan, managing director of Outset Global in Hong Kong, said Asia was seeing “huge volumes moving through a number of markets as investors turn to cash” on Friday, as tech stocks in the region were falling.

The sharp sell-off in digital assets also came a day after Russia’s central bank on Thursday announced draft proposals to ban all cryptocurrency trading and mining. The proposed regulations would also block cryptocurrency investment by banks and prohibit any exchange of cryptocurrency for traditional currencies in Russia, one of the world’s largest cryptocurrency mining centers.

The central bank said in its 36-page report that the rapidly rising value of cryptocurrencies “is defined primarily by speculative demand for future growth, which creates bubbles,” adding that they “also have aspects of pyramids. financials, as their price growth is largely sustained”. by demand from new market entrants.

The announcement initially had little impact on bitcoin, which rose 3.7% against the dollar on Thursday. But by Friday afternoon in Asia, the cryptocurrency had fallen more than 10% from the previous day’s high to its lowest level since August.

“Russian regulators were frustrated [with the cryptocurrency industry] for several years and none of their warnings have been heeded,” said Vince Turcotte, Asia-Pacific sales director at Eventus Systems.

He added that while the Russian proposal was “relatively tougher,” it was just the latest in a series of cryptocurrency announcements by regulators around the world focused primarily on protecting retail investors.

Turcotte compared the situation in Russia to that in China before Beijing began a more aggressive crackdown on the industry. “No one listened [Chinese officials] until they drop the hammer,” he said. Last year, China declared all crypto activities illegal.

Video: Where Will Crypto ‘Anarchy’ Stop | Lex Megatrends Weekly Newsletter

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