Bitcoin Heads for Worst Weekly Slide in a Year Amid Risk Selloff

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Photographer: Akos Stiller / Bloomberg

Photographer: Akos Stiller / Bloomberg

Bitcoin’s rally this year has seen a surge in speed, its worst weekly decline in nearly a year in the face of larger losses in risk-weighted assets.

The largest cryptocurrency tumbled as much as 20% this week, most since March, to trade at around $ 46,925 as of 10:22 a.m. in Hong Kong. The broader Bloomberg Galaxy Crypto Index, which tracks Bitcoin, Ether and three other cryptocurrencies, is down 22% this week.

The tough problem for Bitcoin is the chaos in world markets as a surge in bond yields heralds growing expectations for higher growth and inflation, forcing traders to reevaluate their positions in multiple asset classes. The tech-heavy Nasdaq 100 fell seven of its last eight sessions as stocks like Tesla Inc. and Peloton Interactive Inc. fell.

“Asset risk is increasing right now – we’re seeing stocks go down and cryptography to follow,” said Vijay Ayyar, Asia-Pacific head of Singapore’s Luno cryptocurrency exchange. “The dollar is getting stronger, which is a good indication that bitcoin and crypto will go down.”

Bitcoin’s weakness in the face of market volatility raises questions about its effectiveness as a store of value and a hedge against inflation, a key argument among proponents of its impressive five-fold rally over the past year. Critics have claimed that the surge in digital wealth is a speculative bubble and is set for a repeat of the 2017 boom and bankruptcy.

In a flash, US yields hit 1.6%, causing chaos across the markets

While Bitcoin is often touted as the new “digital gold,” the yellow metal is currently gaining ground with spot gold at $ 1,768 an ounce, a decline of less than 1% per week. The Bloomberg Dollar Spot Index is up 0.3% over the same period, on its way to its biggest gain in a month.

Strong sales in the Grayscale Bitcoin Trust, the world’s largest fund of its kind, as well as the expiration of bitcoin options also add to the volatility, Ayyar said. Confidence has plummeted 20% this week, and losses will eventually race beyond the underlying asset as a once massive price premium to Bitcoin has wiped away as investors took advantage of those gains, he said.

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