- Bitcoin and other cryptocurrencies suffered a severe setback, falling over 15% amid rising recession fears and a global sell-off in risk assets.
- Recent economic indicators such as rising unemployment and weak manufacturing activity have contributed to the market’s sharp reaction.
OUR TAKE
The crypto market has taken a bit of a tumble recently, with U.S.-listed shares of crypto-linked companies falling after Bitcoin fell by 15%. This sharp decline was caused by some pretty dismal economic data, which has led to fears of a possible recession and prompted investors to avoid riskier assets like cryptocurrencies. This sudden change from the recent optimism – caused by the approval of new crypto ETFs and a pro-crypto speech by Donald Trump – shows how volatile the market is and makes you wonder if it can be relied on as a safe haven during economic turbulence. In fact, this rollercoaster nature of crypto isn’t surprising. It’s a young market that reacts sharply to economic trends, making its stability and safe haven status questionable during tough times.
–Heidi Luo, BTW reporter
What happened
Bitcoin’s value fell by more than 15% on Monday, reaching its lowest point in nearly six months, as broader economic concerns led to a sell-off in riskier assets, including cryptocurrencies. This sharp decline also saw major cryptocurrencies like Ether drop by 19%, reverting to price levels not seen since January.
As the market went down, U.S.-listed crypto-related companies took a hit. CleanSpark, Bitfarms, Riot Platforms and Marathon Digital saw their stock prices drop by between 12% and 25% in early trading.
On top of that, big companies like Coinbase and bitcoin buyer MicroStrategy were hit hard, with their shares dropping 18% and almost 23%, respectively.
This whole crypto market decline was triggered by weak economic data pointing to recession risks, which made investors anxious and led to a lot of people pulling out of risky investments.
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Also read: US-listed crypto stocks retreat after Trump-fuelled surge
Why it’s important
The recent downturn in the cryptocurrency market has been a stark contrast to the previous optimism, which was fuelled by the approval of exchange-traded funds (ETFs) tied to the spot prices of bitcoin and ether, the two biggest cryptocurrencies.
This optimism was given a further boost by a pro-crypto speech from Republican presidential candidate Donald Trump at a Bitcoin conference. However, this positive feeling didn’t last long as new economic data showing rising unemployment and a downturn in manufacturing activity prompted people to sell off riskier assets like cryptocurrencies.
This sell-off shows that Bitcoin is becoming more linked to stocks, which makes it less of a safe bet. Some analysts still think it’s a good idea to invest directly in cryptocurrencies via native crypto exchanges. They say it gives you more control and allows you to act more quickly than if you invest indirectly through ETFs and crypto stocks.
“If this weekend is anything to go by, it’s a good reminder of why it’s best to invest in digital assets directly on native crypto exchanges,” said Joshua Peck, founder of crypto hedge fund TrueCode Capital.
“While others were waiting for the futures market to open on Sunday night, we were calmly executing our strategy without interruption,” he added.
“It’s a big reminder that bitcoin and crypto in general are risk assets and sit at the higher end of the risk spectrum,” said Tony Sycamore, market analyst at IG.
