Bitcoin Plummets As Investors Dump Risky Assets

A sharp cryptocurrency selloff over the weekend and on Monday has brought a sharp end to a rally this year that began in January with the US Securities and Exchange Commission’s (SEC) approval of the first US spot Bitcoin exchange-traded funds (ETFs).

Weak economic data last week, including higher US uneployment and weak manufacturing activity, created fears of a US recession and prompted investors to dump risky assets, including cryptocurrencies.

Bitcoin, the most popular cryptocurrency, briefly plunged below the $50,000 (£39,000) mark, taking it to levels last seen in February, before it recovered slightly.

Having traded at nearly $74,000 in March, the token is currently worth around $54,000.

Tech gloom

Ether, the second-biggest crypto coin, is trading at only about 4 percent above its level at the beginning of the year.

Bitcoin fell about 15 percent over the space of 24 hours, while the price of Ether fell about 22 percent over the same period, contributing to the removal of about $367bn from the overall value of cryptocurrencies, according to CoinGecko data.

The fall in crypto prices led to more than $1.13bn in liquidations in the derivatives markets, Coinglass said on Monday.

The declines will be felt by more investors due to the establishment of crypto ETFs this year, funds that track crypto prices without the necessity of directly owning the assets.

The tech-heavy Nasdaq index slid 3.4 percent last week on disappointing earnings from tech giants, making for its worst three-week stretch since September 2022.

Amazon, Intel and Nvidia contributed to the index’s decline.

Political support

Political support for cryptocurrencies had contributed to gains earlier this year, amidst heavy spending by pro-crypto funds and a speech last month in which Donald Trump suggested creating a “strategic national bitcoin stockpile”.

Brian Armstrong, the chief executive of Coinbase, the largest US cryptocurrency exchange, said last week he believes there is a bipartisan shift in favour of the crypto industry and that it is “now being taken seriously” in Washington.

He told investors the company has seen a “shift from both sides” and that there is no disproportionate support from one particular party, irrespective of who may win in November’s US elections.

The crypto industry has faced intense scrutiny from governments and regulators worldwide, including the US Securities and Exchange Commission (SEC), which sued Coinbase last year for failing to register under securities laws, charges the company is fighting in court.