Bitcoin and other crypto assets sink in flight from risk

Coins are displayed next to a Bitcoin ATM. THE CANADIAN PRESS/AP /Kin Cheung

SINGAPORE — Bitcoin and ether slumped to multi-month lows on Friday, with cryptocurrencies swept up in a broader flight from riskier assets as investors worried about lofty tech valuations and bets on near-term U.S. interest rate cuts faded.

Bitcoin, the world’s largest cryptocurrency, fell 5.5 per cent to a seven-month low of US$81,668. Ether slid more than six per cent to $2,661.37, its lowest in four months.

Both tokens are down roughly 12 per cent so far this week.

Cryptocurrencies are often viewed as a barometer of risk appetite and their slide highlights how fragile the mood in markets has turned in recent days, with high-flying artificial intelligence stocks tumbling and volatility spiking.

Cryptocurrencies lose $1.2 trillion in six weeks

“If it’s telling a story about risk sentiment as a whole, then things could start to get really, really ugly, and that’s the concern now,” Tony Sycamore, a market analyst at IG, said of the fall in bitcoin.

About $1.2 trillion has been wiped off the market value of all cryptocurrencies in the past six weeks, according to market tracker CoinGecko.

Prices of Hong Kong-listed spot bitcoin exchange-traded funds launched by China AMC, Harvest and Bosera fell close to seven per cent each on Friday.

Fall from grace

Bitcoin’s slide follows a stellar run this year that propelled it to a record high above US$120,000 in October, buoyed by favorable regulatory changes towards crypto assets globally.

But analysts say the market remains scarred by a record single-day slump last month that saw more than $19 billion of positions liquidated.

“The market feels a little bit dislocated, a bit fractured, a bit broken, really, since we had that selloff,” said Sycamore.

Bitcoin has since erased all its year-to-date gains and is now down 12% for the year, while ether has lost close to 19 per cent.

Citi analyst Alex Saunders said $80,000 would be an important level as it is around the average level of bitcoin holdings in ETFs.

The selloff has also hurt share prices of crypto stockpilers, following a boom in public digital asset treasury companies this year as corporates took advantage of rising prices to buy and hold cryptocurrencies on their balance sheets.

Shares of Strategy, once the poster child for corporate bitcoin accumulation, have fallen 11 per cent this week and were down nearly 4% in premarket trade, languishing at one-year lows.

JP Morgan said in a note this week that the company could be excluded from some MSCI equity indexes, which could spark forced selling by funds that track them.

Its Japanese peer Metaplanet has tumbled about 80 per cent from a June peak.

Crypto exchange Coinbase was down 1.9 per cent in premarket trade and is on course for its longest losing streak in more than a month.

Crypto miners MARA Holdings and CleanSpark were down 2.4 per cent and 3.6 per cent, respectively, while the Winklevoss twins’ newly-listed Gemini GEMI.O has plunged 62 per cent from its listing price.

“Bitcoin market conditions are the most bearish they have been since the current bull cycle started in January 2023,” said digital asset research firm CryptoQuant in its weekly crypto report on Wednesday.

“We are highly likely to have seen most of this cycle’s demand wave pass.”

(Reporting by Rae Wee, Niket Nishant and Vidya Ranganathan. Editing by Kevin Buckland and Mark Potter)