Bitcoin plunges more than 50% below its all-time high

New York (CNN Business) — So far bitcoin came as digital gold. The world’s most valuable cryptocurrency fell 10% on Monday, after plummeting over the weekend. Thus, bitcoin prices have dropped almost 20% in the last week. At a price of just under $31,000, bitcoin is more than 50% off its all-time high of nearly $69,000 from late last year, and at its lowest point since July 2021.

Other cryptocurrencies, sometimes called altcoins, are also facing heavy blows. Ethereum, binance, solana, and cardano are all down around 15% in the past week, while Elon Musk’s beloved dogecoin is down 10%.

Cryptocurrencies are proving to be just as risky as stocks, and moreover, susceptible to the same concerns that are dragging the Dow, S&P 500, and Nasdaq lower.

“Volatile digital asset trading has not been that unusual in previous years,” said Michael Kamerman, CEO of trading platform Skilling. “Cryptocurrencies are increasingly moving in sync with tech stocks as investors treat them as risky assets and often retreat to safer parts of the market during bouts of volatility,” he added.

Kamerman said he remains bullish on bitcoin in the long term. More hedge funds and other large institutions have started investing in cryptocurrencies, and some global central banks are also starting to adopt them.

However, he cautioned that “bitcoin is not immune to the global inflation risk that extends to most other asset classes. Therefore, we should expect the downward trend to continue.”

Bitcoin is plagued by the same problems as stocks

Inflation fears, concerns about large interest rate hikes by the Federal Reserve and nervousness about a possible economic slowdown have rattled Wall Street. And, furthermore, bond yields have skyrocketed.

The 10-year Treasury yield is now just above 3.1% – it has more than doubled this year. Long-term bond yields are now at their highest level since November 2018.

Rising yields have also helped lift the value of the dollar, which tends to rise along with interest rates. The US dollar index is now trading near its highest level in twenty years. Which is bad news for bitcoin too, as many cryptocurrency backers point to dollar weakness as a bullish sign for digital currencies.

As rates (and the dollar) continue to rise, some crypto skeptics believe the bitcoin sell-off has just begun. The Federal Reserve began to withdraw from monthly bond purchases and other stimulus. Which could also be a negative sign for all types of speculative assets.

“The Fed’s drastic liquidity reversal will collapse the pandemic-era bubble in crypto, money-losing tech companies and meme stocks,” said Jay Hatfield, chief investment officer at Infrastructure Capital Management and manager. of the InfraCap Equity Income ETF.

Hatfield said he thinks bitcoin could even crash as low as $20,000 by the end of the year.

The cryptocurrency crash is also affecting several stocks with exposure to the industry. Trader Coinbase fell 17% this Monday and is down more than 65% this year. Robinhood, which also allows people to buy and sell some cryptocurrencies, is down 45% in 2022.

In addition, the shares of various cryptocurrency miners, companies that run servers that solve the complex mathematical puzzles needed to generate new bitcoins, and other cryptocurrencies have also fallen. Hive Blockchain, Marathon Digital Holdings, and Riot Blockchain are down 50% to 60% this year.

The massive pullback in these and other tech stocks with temporary momentum gives yet another sign of the rapid change in market mood this year. The CNN Business Fear & Greed index, which measures seven indicators of market sentiment, is in the Extreme Fear zone.

Investors may continue to eschew volatile cryptocurrencies in favor of safe bets such as dividend-paying blue chip stocks.

Traders are “more reluctant to take on the additional risk associated with the crypto sphere,” DailyFX analyst Tammy Da Costa said in a report.

In that sense, he added that “the future of individual coins or tokens remains doubtful” and that “increases in interest rates are likely to jeopardize the potential for short-term gains” in bitcoin, ethereum and other cryptocurrencies. .

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