Author: Suvashree Ghosh, Sidhartha Shukla, Bloomberg; Translated by: Baishui, Golden Finance
Bitcoin fell for a fourth straight session as part of a broader cryptocurrency sell-off that contrasted with recent record highs in global stock markets.
BTC hit its lowest level since February, changing hands at around $54,400. Smaller tokens such as Ethereum, XRP and Cardano saw larger losses, in some cases exceeding 10%.
Cryptocurrency speculators currently face a host of challenges, including falling demand for U.S. bitcoin exchange-traded funds, signs that the government is disposing of seized tokens and the hard-to-parse impact of U.S. political turmoil.
On top of that, managers of the collapsed Mt. Gox exchange are returning large amounts of bitcoin to creditors in stages. Speculators are unsure how much of the $8 billion will ultimately be sold. On Friday, a wallet associated with Mt. Gox moved $2.7 billion worth of tokens, according to Arkham Intelligence.
Weakened correlation
Meanwhile, the short-term 30-day correlation between bitcoin and MSCI Inc.’s global stock index is teetering near record highs.The question is whether risk aversion in the cryptocurrency space is isolated or signals a cautious quarter for mainstream investing after a strong first half for stocks.
“There’s a general lack of attention in the cryptocurrency market right now,” said Stefan von Haenisch, head of trading at OSL SG Pte. “Most of the news that’s circulating right now, like the Mt. Gox sell-off, is more pessimistic in nature.”
Von Haenisch said that cryptocurrencies need the Federal Reserve to take a more dovish stance on monetary policy, adding that “one or two rate cuts, coupled with an expansion of the Fed’s balance sheet, are the two key factors that cryptocurrencies are really waiting for.”
Investors are awaiting U.S. jobs data due later on Friday for fresh clues on the outlook for Federal Reserve policy. Recent weak economic reports have bolstered the central bank’s case for easing monetary policy in the coming months.
Bitcoin hit an all-time high of $73,798 in March, boosted by unexpectedly strong demand for the first U.S. ETF. Inflows have since slowed, pushing prices lower and casting a shadow over the rest of the digital asset market.
Ethereum ETF approval is pending, but if the cryptocurrency sell-off continues, interest in these products may be mixed.
Liquidation
More than $800 million worth of bullish cryptocurrency bets were liquidated in the past three days, one of the largest such liquidations since April, Coinglass data showed.
“Poor liquidity over the weekend will exacerbate any volatility caused by liquidations, even small ones,” said Caroline Mauron, co-founder of digital asset derivatives liquidity provider Orbit Markets. At the same time, the return of U.S. investors from the July 4 holiday should help bring some stability, she added.
Operators of the power-hungry computers that underpin the bitcoin blockchain are continuing to take a financial hit from April’s so-called halving, which capped the amount of new coins they receive for their work. One response among these bitcoin miners is to sell off some of their coin inventory.
“The $51,000 to $52,000 range is critical as many bitcoin miners are reaching the break-even point for profitable mining,” said Le Shi, head of trading at market-making and algorithmic trading firm Auros.
