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Cryptocurrencies are swept by the flight from risk

The crypto currencies were caught up in the broad flight away from risk assets, which sent bitcoin and ether down to their lowest levels for several months as concerns about high tech valuations persisted and bets made on Federal Reserve policy easing near-term faded.

Bitcoin, the largest cryptocurrency in the world, dropped 2.1% and broke below $86,000, hitting a seven-month low of $85,350.75 during Asian trading. Ether fell more than 2%, to $2,777.39 its lowest level in four months.

Both tokens faced weekly losses of approximately 8%.

Investors often use cryptocurrency as a barometer to gauge their risk appetite. The sharp decline in price shows just how fragile the market's mood has become in recent days. High-flying AI stocks have plummeted and volatility is on the rise.

Tony Sycamore is a market analyst for IG. He said that the drop in bitcoin could be a sign of a general risk sentiment.

According to CoinGecko, the market tracking service, the value of all cryptos has dropped by $1.2 trillion in the last six weeks.

The prices of Hong Kong listed spot bitcoin ETFs, launched by China AMC Harvest and Bosera, fell almost 7% on each Friday.

Fall from Grace

Bitcoin's fall has been rapid and hard after a spectacular run in this year, which propelled it to an all-time high of over $120,000 in October. This was boosted by favorable regulatory changes around the world towards crypto assets.

Analysts claim that the market is still scarred from a crypto crash of record proportions last month. This saw more than 19 billion dollars liquidated across leveraged positions, as panic sales and low liquidity caused sharp swings.

Sycamore said, "The market is feeling a little dislocated and a lot fractured since the selloff.

Bitcoin has now lost all of its gains for the year and is down by 8%, while Ether has fallen close to 16%.

The crypto selloff also has hurt the share prices of stockpilers. This follows a boom of public digital asset treasury firms this year, as corporations took advantage of rising prices and bought cryptocurrencies to hold on their balance sheet.

Shares of Strategy have dropped 11% in the past week, and they are now at a one-year low.

Metaplanet, its Japanese counterpart, has fallen about 80% since a peak in June.

CryptoQuant, a digital asset research company, said in its weekly crypto report published on Wednesday that "Bitcoin markets are at their most bearish since the bull cycle began in January 2023."

We are likely to have seen the majority of this cycle's wave of demand pass." Reporting by Rae Wee, Editing by Kevin Buckland

(source: Reuters)