(Bloomberg) — Bitcoin’s sharp selloff has caught the attention of investors who see the digital token’s notable volatility as a harbinger of a broader shift in global markets’ risk appetite.
Most Read Articles on Bloomberg
After plummeting nearly 16% in April, the cryptocurrency has fallen about 4% in the past two days, the worst since the collapse of Sam Bankman Fried's FTX digital asset empire in November 2022. This was a monthly decline. The token changed hands at $57,462 as of the 7th. London Thursday morning at 24:00, the lowest price in about two months.
Some investors are looking at Bitcoin's fluctuations for clues about changes in liquidity dynamics that could affect other assets. The token has fallen over the past few weeks as the US Federal Reserve signaled that interest rates would remain high and signaled a tightening of financial conditions through rising Treasury yields and the dollar.
“Bitcoin is our favorite canary,” Charlie Morris, chief investment officer at ByteTree Asset Management, wrote in a note. “This warns of problems ahead for financial markets, but we can be confident that they will eventually recover.”
The largest digital asset hit an all-time high of about $74,000 in mid-March, buoyed by heavy inflows into the debut U.S. spot Bitcoin exchange-traded fund from BlackRock Inc., Fidelity Investments and others. Reached.
Demand for the product has since slumped, and the market has not benefited from the tailwind from the launch of a Bitcoin and Ether spot ETF in Hong Kong this week.
Net asset value discounts have widened significantly for some U.S. portfolios, highlighting the challenges posed by Bitcoin's volatility. On Wednesday, the U.S. spot ETF group saw its largest single-day net outflow ever.
Read more: US Bitcoin ETF records outflows, BlackRock Buffett Fidelity Fund
macro squad
According to data compiled by Bloomberg, Bitcoin has fallen in April four times in the past decade, and three of those were foreshadowing May's decline of an average of 18%.
Still, crypto and other speculative investments could see some relief if inflationary pressures subside and the market revives bets on the Fed's stance significantly easing.
Federal Reserve Chairman Jerome Powell maintained expectations for rate cuts this year after the central bank concluded its latest meeting on Wednesday. But he also acknowledged that the explosion in inflation has undermined confidence that price pressures are receding.
Youwei Yang, Chief Economist and Deputy Chief Economist, said: “Markets are closely monitoring inflation, employment and economic indicators for any unexpected shocks or to gain confidence in the possibility of rate cuts, and we are looking forward to the future. “Over the next three to four months, we will see less bullishness and more risk appetite.”President of virtual currency miner BIT Mining Ltd.
Most Read Articles on Bloomberg Businessweek
©2024 Bloomberg LP
