Investors dump altcoins as crypto rally stalls

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CHICAGO, IL – DECEMBER 19: Traders trade VIX contracts on the Cboe Global Markets exchange… [+] (formerly CBOE Holdings, Inc.) on December 19, 2017 in Chicago, Illinois. Last week, the exchange became the first in the United States to begin trading Bitcoin futures. Bitcoin prices have surged over the past year, rising from $1,000 a coin at the start of the year to a recent high of around $20,000. (Photo by Scott Olson/Getty Images)

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Cryptocurrency prices extended their drop to 7% for the week, with declines across the board but concentrated in tokens other than market leaders, bitcoin and ether, as investors appear to adopt risk-free strategies.

BitcoinBTC and Ether now make up 63% of the total $1.24 trillion cryptocurrency market, up from 55.8% at the end of last year. This week’s pullback comes after the market recovered from a low of around $828 billion at the end of 2022, a year of widespread bankruptcies and other disruptions for digital assets.

Risk aversion sentiment was evident in the bond market on Thursday, where the yield on 10-year Treasury bills fell 6 basis points to 3.55%. Investors appear to be reacting to the possibility of the United States defaulting on debt as the White House and House Republicans battle to raise the borrowing limit. The United States hit its statutory limit of $31.4 trillion in January, but the Treasury managed to avert a crisis thanks to emergency spending cuts.

Ironically, buyers are flocking to the very bonds believed to be in default, accepting ever lower yields as the situation unfolds in Washington. Treasuries, however, often find favor in tumultuous markets. Short-term yields are higher, up to 5.06% for three-month Treasury bills, an unusual situation compared to longer-dated bonds that may portend a recession.

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While general stock market averages were only marginally lower, crypto mining stocks took a hit. CleanSpark, a sustainable bitcoin miner, leads the pack with a 10.7% decline. Riot Platforms, Bitfarms and Marathon Digital all fell more than 8%, returning some of the 40% gain the sector saw last week after investor confidence in the digital asset sector turned positive.

Microstrategy, the enterprise software company with a 140,000 token stake in bitcoin, fell 6.3%, worse than the underlying cryptocurrency itself. Bitcoin itself fell 3.6% to $28,234.55 per coin. The major cryptocurrency briefly peaked at $30,365 on Tuesday before a steady decline that took it to a 10-day low.

Ether followed suit, dropping 2% to $1,938.37. Ether saw a milder decline than bitcoin as withdrawals from the cryptocurrency that had been locked to the EthereumETH blockchain remained modest at around $1.6 billion out of a total of $38 billion, according to the Nansen data provider. Some of these coins had been frozen since December 2020 but were released as part of the latest Ethereum upgrades.

Ethereum gas fees have also increased over the past week, largely due to the memecoin mint. The average gas fee, a transaction fee paid to the Ethereum network, rose to 81.94 gwei on Wednesday, more than doubling since Monday. A gwei is a fraction of ether, equal to one billionth of a coin.

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