Bitcoin fell below $30,000 for the first time since July as rising interest rates cause investors to flee riskier corners of global financial markets.
The world’s most actively traded digital token fell to $29,730 in Asia on Tuesday, according to data from Refinitiv, before rising to around $32,000 in European activity. It has fallen more than 50% from the peak reached in November.
Other digital assets have also come under severe pressure in recent weeks, causing the market value of the top 500 digital assets to halve from the all-time high reached in November 2021 at $1.6 billion, according to CryptoCompare data compiled by the Financial Times show.
The crypto crisis comes as investors rushed into speculative financial assets after a wave of rate hikes by global central banks sparked market turmoil. Other risky assets such as loss-making company stocks and junk bonds also came under pressure, but cryptocurrencies took a particularly intense hit.
The crypto market boomed as central banks pushed interest rates to record lows during the height of the coronavirus crisis, sending traders hunting for assets offering strong yields. However, a sell-off in global government bond markets this year has pushed yields higher, increasing the potential returns investors can earn from holding investment-grade debt securities.
“This is a risk in all asset classes, including crypto,” said Daniel Ives, strategist at Wedbush Securities, who added that there was “nowhere to hide.” .
In a sign of the scale of the losses for the crypto market, an FT Wilshire gauge that tracks the top five digital coins excluding bitcoin has fallen more than 70% from its recent high. In the past, fast-growing tokens such as Solana, touted as an alternative to the Ethereum network, quickly deflated in value.
Shares listed in companies exposed to crypto also fell. MicroStrategy, which is led by crypto advocate Michael Saylor, has fallen 60% this year. Coinbase fell 67% in 2022, falling below $100 on Monday for the first time since the exchange went public in New York in April 2021.
Bitcoin mining companies such as Bitfarms and Marathon Digital Holdings, which use powerful computers to solve puzzles for which they are compensated in digital tokens, also fell sharply.
The pullback also highlighted how closely the performance of bitcoin and other cryptocurrencies was tied to the US stock market. According to data provider Kaiko, the correlation between bitcoin and the Nasdaq Composite, a gauge weighted by US Big Tech companies, has reached record highs.
“Some investors play crypto as an inflation hedge, but it trades like the Siamese twin of the Nasdaq,” Ives said.
Click here to visit the Digital Assets Dashboard