Crypto Stocks Crash as Bitcoin Drops to New Six-Month Low

[ad_1]

Bitcoin fell to a fresh six-month low on Monday, leaving the digital token 50% below its November peak and sending shares of companies whose fortunes are tied to the cryptocurrency market plummeting.

The price of the digital coin fell 9% in afternoon trading in Europe to $33,307, its lowest point since mid-July. Although it remains the largest cryptocurrency in the world by market value, Bitcoin has lost more than half its value since peaking at just under $69,000 last year.

The broader digital asset market has also come under intense selling pressure, with an FT Wilshire index tracking the top five non-Bitcoin digital coins down 27% in 2022.

The steep falls in the crypto markets have ricocheted off the US stock market. A basket of cryptocurrency-related stocks gathered by Goldman Sachs lost about a third of its value in 2022. Coinbase, the U.S.-listed crypto exchange, fell 13% on Monday, while MicroStrategy, a software company that invests heavily in bitcoin, fell by a similar margin.

“It looks like a crash at the moment,” Michael Every, global strategist at Rabobank, said in a note on Monday.

The selloff coincided with a broader move away from speculative assets by investors as they prepare for central banks around the world to rein in their stimulus packages. Higher interest rate expectations make riskier investments less desirable because they increase the returns investors can earn from holding high-quality securities like US government bonds.

“It’s really an environment where you should be short for at least another month . . . all the speculative and hypey stuff, and the long companies taking advantage of rate hikes,” said Tancredi Cordero, founder of Kuros Associates Short selling refers to betting against a company’s stock, while “going long” is the opposite.

“The funny thing about crypto and bitcoin,” said Joel Kruger, market strategist at LMAX Group, “is that these are assets that were born out of a rejection of the existing system, and yet they benefited so much from this system and the monetary policy incentives that resulted in an unprecedented flow into risky assets”.

The appeal of cryptocurrencies has been further damaged by moves by regulators around the world to tighten rules on how digital assets are traded and advertised.

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

Russia’s central bank proposed last week to ban all cryptocurrency operations in the country, saying that like other “financial pyramids”, the value of digital coins is “largely supported by demand from new entrants. on the market”.

The UK’s Financial Conduct Authority said last Wednesday it hoped to crack down on misleading crypto ads, following moves to boost consumer protections in Spain, Singapore and Italy.

Shares of MicroStrategy, led by famed crypto bull Michael Saylor, fell more than 17% on Friday after the U.S. Securities and Exchange Commission objected to the group’s exclusion of Bitcoin price fluctuations from its adjusted accounting measures.

Weekly newsletter

For the latest fintech news and views from the FT’s network of correspondents around the world, sign up for our weekly newsletter #fintechFT

Register here with one click

[ad_2]