Bitcoin falls as much as 10% as dangerous belongings fall globally, regulatory issues mount
Bitcoin prices have fallen sharply amid the global selloff in stocks.
Luke MacGregor | Bloomberg | Getty Images
Bitcoin price fell sharply on Monday as investors began to reduce risk amid the global decline in equity markets.
Bitcoin is often referred to as a safe haven, but its price tends to decline with a wider decline in risk assets. Bitcoin’s rally this year coincided with the risk-on rally and, like stocks, the cryptocurrency is prone to sharp declines in September.
Bitcoin lost up to 10% on Monday morning. It was last down 7% to $ 44,075.90, according to Coin Metrics. The broader crypto market is also in the red, with ether falling 7% to $ 3,113.02, as are crypto-related stocks. Coinbase and Microstrategy lost 4% while Square was down 3%. Riot Blockchain and Marathon Digital were down 6%.
“This sell-off is the continuation of an established pattern of traders redeeming their riskier assets to cover margin calls or sit on the sidelines until the markets calm down and they are more comfortable returning to riskier positions,” Leah said., Valkyrie Investments Forest CEO told CNBC. “If Bitcoin has ever had the opportunity to establish itself as a safe haven or digital gold, with US companies signaling that their profit calls will be showing poor results, now it seems like the time has come.”
Jim Paulsen, Leuthold Group’s chief investment strategist, said that while bitcoin tends to fall with the broader markets, that doesn’t mean it has a correlation to stocks, and said the correlation is “practically zero”.
“That doesn’t mean Bitcoin can’t go down with stocks – and I agree that it often does – but I think it goes differently than stocks,” he told CNBC. “To me it is a very diversifying investment compared to most of the other things in the portfolio. That alone can result in lower volatility, but it doesn’t necessarily mean that it does not participate in risk-free phases. There is a difference between safe haven and diversification . “
Paulsen added that part of the reason Bitcoin was branded a safe haven has to do with its characterization as a currency, which was part of the original vision for how it was written in the original whitepaper.
“Because it was put in the bucket of currency, it is considered a safe haven because the dollar is a safe haven to walk to in times of public risk taking,” he said. “But that’s the broadest of any currency imaginable. It’s a method of exchange, not a currency.”
Global equity markets are sliding as investors fear spreading the risk of a cleanup of the Chinese real estate market tied to highly indebted developer Evergrande. Investors are also focusing on the Federal Reserve and whether it will signal its willingness to remove monetary stimulus from the economy. The central bank will begin its two-day meeting on Tuesday.
Fundstrat’s Tom Lee said the sell-off shows how much investors have valued 24-hour liquidity since the beginning of the “Covid era”.
“Both institutions and individuals are more willing to buy cash because there is less friction in liquidation. Selling Bitcoin is interesting to me because I suspect it has a lot to do with risk reduction in Asia,” where Savers tend to invest their money in real estate and crypto more than stocks, Lee explained at CNBC’s Tech Check on Monday. “I don’t think bitcoins have gone down today, it’s actually very ominous, but it shows you that people really value liquidity.”
Bitcoin traded above $ 50,000 earlier this month, topping a major level of psychological resistance for traders. Now, however, the cryptocurrency is below its 50-day moving average of $ 46,514, which analysts and traders are looking for a move up or down and getting a feel for the medium-term trend.
Investors should “wait until tomorrow to decide whether to reduce exposure and manage the risk of a longer withdrawal,” Katie Stockton, managing partner of Fairlead Strategies, told CNBC.
The crypto decline comes as uncertainty about how stablecoins will be regulated grows. The Financial Stability Oversight Council could classify them as systemically risky, the New York Times reported over the weekend. This could expose them and their operators to strict regulations.
The President’s Working Group on Financial Markets is working on a report on stablecoins, and the Fed is expected to issue a paper this month on central bank digital currencies that could touch on stablecoin risks.
As Bitcoin slipped, gold futures rose 0.8% to $ 1,765.70 an ounce.