Cryptocurrencies Slide With 15% Drop In Bitcoin Falling 15% And 20% For Ether

Bitcoin and ether prices both fell drastically this week, wiping out almost $150 billion from the crypto market.

According to Coin Metrics, bitcoin was trading around $36,000 late Friday, down nearly 15 per cent. Ether, the second-largest cryptocurrency by market capitalization, has dropped about 20 per cent to around $2,500.

Cryptocurrency losses follow Thursday’s losses on Wall Street. The Nasdaq Composite sank 7.6 per cent this week, while the S&P 500 fell 5.7 per cent for the third week in a row.

Investors have been selling riskier assets as interest rates have risen. The benchmark 10-year Treasury rate was above 1.9 per cent earlier this week.

The Federal Reserve has also stated that it intends to start shrinking its balance sheet, tapering bonds, and hiking interest rates.

The typical investment thesis for bitcoin is that it acts as a hedge against growing inflation as a result of government stimulus, but analysts warn that a more hawkish Federal Reserve might stifle bitcoin’s growth.

However, as Treasury yields fell later in the week, senior market analyst Edward Moya of foreign exchange trading firm Oanda said it was “a little surprised to not see bitcoin react more favourably to the reversal in Treasury yields.”

Since November, bitcoin values have plummeted by more than 40% from their all-time high of almost $69,000.

Some experts predict that the crypto sector will soon enter a bear market, owing to increased regulatory scrutiny and volatile price movements that have harmed bitcoin’s chances.

Cryptocurrencies are also being targeted by regulators. China has outright banned any cryptocurrency-related activity, and the US government is likewise cracking down on certain areas of the business.

In a Thursday note, Oanda’s Moya forecasted that bitcoin would fall below $40,000 as Russia’s central bank recommended a ban on cryptocurrency use and mining on Russian soil, stating that the digital currency threatens “financial stability and monetary policy autonomy.”

He pointed out that Russia is one of the top three countries for bitcoin mining.

(Adapted from CNBC.com)

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