Bitcoin’s rally this year has hit a speed bump, putting it on track for the worst weekly slide in almost a year amid wider losses in risk assets.
The largest cryptocurrency slumped as much as 21 percent this week, the most since March. The wider Bloomberg Galaxy Crypto Index, tracking bitcoin, ether and three other cryptocurrencies, is down 23 percent this week.
The price earlier dipped to as low as US$45,525, nearing a key Fibonacci level at about US$45,000, before recovering some losses to about US$46,375 as of 6:21am in London, according to consolidated pricing compiled by Bloomberg.
Photo: Bloomberg
The rough patch for bitcoin comes amid wider chaos in global markets, as a surge in bond yields heralds growing expectations that growth and inflation are moving higher, and forcing traders to re-evaluate their positions across multiple asset classes.
The tech-heavy NASDAQ 100 dropped in seven of the past eight sessions as stocks like Tesla Inc and Peloton Interactive Inc declined.
“Risk-on assets are taking a hit at the moment — we’re seeing stocks slide and crypto is following,” said Vijay Ayyar, head of Asia-Pacific for cryptocurrency exchange Luno in Singapore. “The [US] dollar is strengthening, which is a good indication to expect a slide in bitcoin and crypto.”
Bitcoin’s weakness in the face of market gyrations raises questions about its efficacy as a store of value and hedge against inflation, a key argument among proponents of its stunning fivefold rally over the past year.
Detractors have maintained the digital asset’s surge is a speculative bubble and it is destined for a repeat of the 2017 boom and bust.
While bitcoin is often touted as the new “digital gold,” the yellow metal is winning out at the moment, with spot gold holding at US$1,764 per ounce, down about 1.1 percent for the week. The Bloomberg Dollar Spot Index is up 0.4 percent in the same period, on track for its strongest gain in a month.
Heavy selling in the Grayscale bitcoin Trust, the world’s largest such fund, as well as the expiry of bitcoin options are also contributing to the volatility, Ayyar said.
The trust has slumped 20 percent this week, with losses at one point racing past its underlying asset, as a once-massive price premium over bitcoin has evaporated as investors cashed in on those gains, he said.
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