Bitcoin fell below $30,000 for the first time since July, as rising interest rates sent investors fleeing the most dangerous corners of global financial markets.
The world’s most traded digital token fell to $29,730 in Asia on Tuesday, according to Refinitiv data, before recovering to around $32,000 in European activity. It has fallen more than 50 per cent from its high in November.
Other digital assets have also come under heavy pressure in recent weeks, causing the market capitalization of the top 500 digital assets to halve from the record reached in November 2021 to $1.6 trillion, according to CryptoCompare data compiled by the Financial Times.
The cryptocurrency’s decline comes as investors exit speculative financial assets after a wave of interest rate hikes by global central banks that led to the imposition of rules across all markets. Other risky assets such as stocks in money-losing companies and junk bonds have also taken pressure, but cryptocurrencies have taken a particularly hard hit.
The cryptocurrency market has boomed as central banks pushed interest rates to record lows at the height of the coronavirus crisis, prompting traders to search for assets that offer solid returns. However, a massive sell-off in global government bond markets this year has driven up yields, boosting the potential returns that investors can reap from owning high-quality debt.
“This is a risk across all asset classes including cryptocurrencies,” said Daniel Ives, strategist at Wedbush Securities, adding that “there is nowhere to hide.”
In a sign of how deep the losses in the cryptocurrency market are, the FT Wilshire barometer that tracks the top five cryptocurrencies excluding bitcoin is down more than 70 percent from its recent rally. Once a fast-growing token like Solana, which was billed as an alternative to the Ethereum network, is rapidly shrinking in value.
Shares of companies exposed to cryptocurrency also fell. MicroStrategy, led by crypto advocate Michael Saylor, is down 60 percent this year. Coinbase is down 67 percent in 2022, falling below $100 on Monday for the first time since the exchange went public in New York in April 2021.
Bitcoin miners such as Bitfarms and Marathon Digital Holdings, which use powerful computers to solve puzzles that are offset by digital tokens, have also fallen sharply.
The decline also highlights how the performance of Bitcoin and other cryptocurrencies is closely related to the US stock market. Correlation between bitcoin and the Nasdaq Composite, a metric that is weighted toward major tech companies in the United States, has reached record levels, according to data provider Kaiko.
“Some investors are playing cryptocurrency as a kind of hedge against inflation, but it is trading like the Siamese twin on the Nasdaq,” Ives said.
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