Bitcoin has fallen below $30,000 for the first time since July as interest rate hikes send investors fleeing riskier corners of global financial markets.
The world’s most-traded digital token fell as low as $29,730 in Asian trading on Tuesday, according to Refinitiv data, before recovering to around $32,000 in European activity. It has fallen more than 50 percent from the peak it reached in November.
Other digital assets have also come under heavy pressure in recent weeks, halving the market value of the top 500 digital assets from the record high reached in November 2021 to $1.6 trillion, according to CryptoCompare data compiled by the Financial Times.
The cryptocurrency crash comes as investors have fled speculative financial assets after a wave of rate hikes by global central banks sent markets into uproar. Other risky assets, such as losing stocks and junk bonds, have also come under pressure, but cryptocurrencies have taken a particularly heavy hit.
The crypto market boomed as central banks pushed interest rates to record lows at the height of the coronavirus crisis, prompting traders to seek assets that provide strong returns. However, a big sell-off in global government bond markets this year has lifted yields, increasing the potential returns investors can earn from holding high-grade debt.
“This is a risk across all asset classes, including crypto,” said Daniel Ives, a strategist at Wedbush Securities, adding that “there was nowhere to hide.”
In a sign of how deep the losses are for the crypto market, an FT Wilshire indicator that tracks the top five digital currencies, excluding bitcoin, is down more than 70 percent from its recent high. Once fast-growing tokens like Solana, heralded as an alternative to the Ethereum network, have quickly deflated in value.
Listed shares in crypto-exposed companies have also plunged. MicroStrategy, which is run by crypto advocate Michael Saylor, is down 60 percent this year. Coinbase is down 67 percent in 2022, dipping below $100 on Monday for the first time since the exchange went public in New York in April 2021.
Bitcoin mining companies like Bitfarms and Marathon Digital Holdings, which use powerful computers to solve puzzles for which they are compensated in digital tokens, have also fallen sharply.
The pullback also highlighted how the performance of bitcoin and other cryptocurrencies was closely tied to the US stock market. The correlation between bitcoin and the Nasdaq Composite, a gauge that skews toward big US tech companies, has reached record levels, according to data provider Kaiko.
“Some investors are playing crypto as a hedge against inflation, but it is trading like the Siamese twin of the Nasdaq,” Ives said.
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