Bitcoin Prices Keep Plunging
With no sign of stopping or where the bottom may be.
3 min
Cryptocurrency prices tumbled over the weekend and into Monday, with Bitcoin nearing a yearly low as investors continued to dump risky assets amid a tough stock market and challenging macroeconomic backdrop.
The price of Bitcoin has fallen more than 10.2% over the past 24 hours to roughly $44,000, deepening losses from over the weekend after changing hands around $51,000 on Friday. It puts the largest crypto at its lowest level since July 2021.
The latest selloff brings Bitcoin to less than half the value of its all-time high of $99,180 reached in November 2021, and is a significant move away from the relatively tight range near $57,000 that Bitcoin has been trading around for months.
“Bitcoin has followed the lead of the equity market, extending lower after a weak April,” said Katie Stockton, managing partner at technical research group Fairlead Strategies.
“Short-term momentum has deteriorated,” Stockton said. “Bitcoin is no longer oversold from a short-term perspective. This creates additional risk.”
Ether, the second-largest crypto, was down 10% to below $3590, declining over the weekend after trading around $3,880 on Friday. It’s now changing hands around the lowest levels since 2021.
Smaller cryptos, or “altcoins,” were not spared, declining Monday to further losses since Friday. Solana and Cardano both fell around 12% to 15%. Luna, the token that plays an integral role in maintaining stablecoin TerraUSD’s peg to the U.S. dollar, has dropped more than 30% since Friday after selling pressure saw Terra de-peg over the weekend and Monday. The incident with Terra has also rattled the crypto space more widely.
Memecoins— called that because they were initially intended as internet jokes rather than significant blockchain projects—also fell, with Dogecoin losing 13% and Shiba Inu 16% lower.
Bitcoin and other digital assets should, in theory, trade independently of mainstream financial markets. But the recent selloff in cryptocurrencies largely matches action in the stock market, and Bitcoin has largely shown itself to be correlated with other risk-sensitive assets like stocks, and especially technology stocks.
The tech-heavy Nasdaq Composite index has lost more than 25% this year, putting it in bear market territory, while the wider S&P 500 is down 16%. The S&P 500 notched its fifth straight week of losses last Friday, the worst run since 2011, and stocks were headed lower again on Monday.
Investors face a challenging and dynamic monetary policy environment. The Federal Reserve has already moved aggressively to raise interest rates this year, and is only expected to keep going as the central bank fights historically high inflation. This risks significantly denting economic demand, causing a recession.
The continuation of severe Covid-19 lockdowns in China, which threaten to compromise global supply chains, limiting companies’ access to materials and only stoking inflation further, only complicates matters.
Against this backdrop, “risk assets” like tech stocks and cryptos are faring particularly badly as investor sentiment deteriorates, hurt in part because bond yields keep rising.
The yield on the benchmark 10-year U.S. Treasury note neared 3.2% at points on Monday, which would put it on track to close at the highest levels since late 2018. When yields climb, the math is tough for riskier assets: Higher yields reduce the extra return relative to bonds that traders expect to get from taking riskier bets.
So where will cryptos find the bottom? In the near-term, volatility looks expected to continue, and a turnaround may not be coming anytime soon.
“Bitcoin may be on the course to restart a steep downtrend,” said Yuya Hasegawa, an analyst at crypto exchange Bitbank, who sees the largest crypto trading in a range of $30,000 to $38,000 this week.
Looming large in the days ahead is inflation data for April. The U.S. consumer price index (CPI) is due on Wednesday, and investors are likely to latch onto the number as the market keeps revising its estimates for how aggressive Fed policy will be.
If CPI grew more than 8.1% year over year last month, which is around what markets expect, investors could take that as a sign that the Fed will move more aggressively—and this could lead to continued selling.
“Although it will not be enough to reverse the market’s sentiment completely, lower CPI readings will suffice to support the price of Bitcoin temporarily,” said Hasegawa. “Until then, the price has to maintain the $33,000 psychological level, which is also around the 2022 low, to prevent the technical sentiment from aggravating further.”
Another negative sign for the crypto market is that institutional money may be leading the price pressure, according to Marcus Sotiriou, an analyst at digital asset broker GlobalBlock. Sotiriou said that, preceding the recent drop, the price for Bitcoin listed on exchange Coinbase Global (ticker: COIN) was at a discount compared to the Binance exchange.
“This is telling as a greater percentage of institutions use Coinbase compared to retail, whereas the opposite is the case for Binance,” Sotiriou said. “The price mismatch mentioned suggests institutions are not currently as interested as retail.”
Reprinted by permission of Barron’s. Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: May 8, 2022.
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But leading Australian economist says there are five reasons for investors to be optimistic about the future
3 min
A 291-point or 3.69 percent dive in the benchmark ASX 200 index over April has all but wiped out the Australian share market’s gains for 2024. There was a 140-point or 1.81 percent drop in the ASX 200 on Monday and a minor further fall yesterday. The Australian market has followed the US lead this month, with the S&P 500 also down significantly, losing 232 points or 4.42 percent since 1 April.
The catalysts include last week’s hotter-than-expected US inflation data. Although analysts think Australian inflation is unlikely to follow suit, stickier-than-expected inflation in the US may delay the first interest rate cut by the US Federal Reserve. As the US is the world’s largest economy, this may have implications for central bank decisions in other nations like Australia.
“ … uncertainty over when the Fed will start to cut rates has been increased by three worse than expected monthly CPI inflation results in a row …,” said AMP chief economist Dr Shane Oliver. “This has seen money market expectations for 0.25 percent rate cuts this year scaled back from seven starting in March this year to now less than two starting in September. And in Australia they have been scaled back from nearly three starting in June to no rate cut until late this year/early next.”
On top of that, Iran’s retaliatory strike on Israel and Israel’s insistence that a response will be forthcoming despite many Western nations’ objections have made investors nervous. If Iran were to become more involved in the ongoing war, this may have ramifications for oil prices.
“Another sharp spike in oil prices would be a threat to the economic outlook as it could boost inflation again … potentially resulting in higher than otherwise interest rates and act as a tax hike on consumers leaving less to spend on other things,” Dr Oliver said.
Also, in Australia, the pandemic savings buffers people have been using to cope with the cost of living crisis are being depleted and China’s weak property sector is impacting demand for iron ore. All of this makes shares vulnerable to a pullback amid stretched valuations and more trading volatility ahead, Dr Oliver said.
On balance though, Dr Oliver thinks an upward trend is likely to remain for shares. “From their lows last October, it has been relatively smooth sailing for shares – with US shares up 28 percent, global shares up 25 percent and Australian shares up 17 percent to recent highs.”Dr Oliver said the past few weeks have “seen a rough patch” but the share market is likely to continue its bull run.
Markets have been strong since November 2023 due to falling inflation and optimism that the interest rate cycle is at its peak. Many economists have expressed surprise that the jobs market in many Western countries has remained strong despite weaker economic conditions. Some are terming this “immaculate disinflation” because it goes against the traditional trend of many people losing jobs when economies slow down.
Dr Oliver says there are five reasons to be optimistic about the share market’s strength:
In this climate, Dr Oliver recommends that investors stick to an appropriate long-term investment strategy and accept that share market pullbacks are “healthy and normal”.
Consumers are going to gravitate toward applications powered by the buzzy new technology, analyst Michael Wolf predicts
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