Finance
Bitcoin Plunges, Ether Has Worst Drop Since 2021 While Crypto Sinks
(Bloomberg) — Cryptocurrencies reeled Monday from a bout of risk aversion in global markets, sending Bitcoin down more than 10% at one point and saddled second-place Ether with its steepest decline since 2021.
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Bitcoin was trading 8.5% lower at $54,100 as of 10:40 a.m. in Singapore, adding to a 13.1% drop last week, the worst since the period when the FTX exchange imploded. Ether lost more than a fifth of its value before losing some of the slide and changing hands at $2,275. Most major tokens were deep in the red.
The declines come as a global stock sell-off intensifies, reflecting concerns about the economic outlook and questions about whether heavy investment in artificial intelligence will live up to the hype surrounding the technology. Geopolitical tension in the Middle East is increasing, increasing investor trepidation.
U.S. Bitcoin exchange-traded funds suffered the largest outflows in about three months on August 2. One question is whether the products will attract dip buyers when they resume trading, or succumb to deeper exits.
Trade
Digital assets are suffering some of the declining yen carry trade as speculators adjust to higher interest rates in Japan, said Hayden Hughes, head of crypto investments at family office Evergreen Growth.
“These investors are also battling a drastic increase in hedging costs based on the volatility of the U.S. dollar-Japanese yen trading pair,” Hughes said.
Bitcoin has been buffeted by a range of factors since hitting a record high of $73,798 in March, including shifting political fortunes in the US as pro-crypto Republican Donald Trump and Democratic opponent Vice President Kamala Harris – who has yet to detail a policy position in digital assets – lock horns in the presidential race.
Also hanging over the market is the possible sale of Bitcoin seized by governments and the risk of a surplus of tokens being returned to creditors through bankruptcy proceedings.
Fed Outlook
Bond traders have increased their bets on US interest rate cuts from September to support economic expansion. The prospect of less restrictive monetary policy is actually “a good thing for crypto,” argued Sean Farrell, head of digital asset strategy at Fundstrat Global Advisors LLC.
Bitcoin’s pullback from its lows Monday left the token at levels last seen in February. Ether, meanwhile, fell back to prices previously seen around the turn of the year. As with Bitcoin, it is unknown how investors in new US spot Ether ETFs will react.
Justin D’Anethan, head of Asia Pacific business development at market maker Keyrock, said the crypto route was led somewhat by Ether, highlighting social media rumors of institutional sales of Ether-related assets.
About $700 million in bullish crypto positions using derivatives have liquidated in the past 24 hours, Coinglass data shows, a sign that leveraged betting is coming unstuck.
Khushboo Khullar, a venture partner at Lightning Ventures, which invests in Bitcoin-linked companies, said the broad stock decline had caused some “panic,” causing investors to rush for liquidity to settle margin calls. She argued that the crypto retreat is a “nice buying opportunity.”
Bitcoin’s gain since the start of the year has moderated to around 24%, compared with a 19% gain in gold and a 9% gain in a benchmark for global equities.
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