Bitcoin and U.S. cryptocurrency stocks fell sharply on Monday along with the rest of the stock market as weak jobs data and the Fed’s decision to hold off on cutting interest rates stoked fears of a U.S. economic recession.
Bitcoin prices have fallen more than 15% over the past five days, dropping below $55,000 to their lowest in nearly six months, while Ethereum has fallen more than 22% to $2,463, its lowest since January.
Shares of crypto miners including CleanSpark, Bitfarms, Riot Platforms and Marathon Digital fell between 12% and 25% at the start of trading. The stocks of these companies edged higher throughout the day but remained lower overall.
Shares in cryptocurrency trading site Coinbase fell as much as 18%, while shares in bitcoin buyer MicroStrategy plummeted as much as 23%.
This was a complete downfall for the cryptocurrency industry, which had been buoyed by hopes that regulation of the industry would be eased.
Crypto investors are banking on Donald Trump’s victory in November and are hoping that former president Trump will roll back controversial industry regulations put in place under President Joe Biden.
Cryptocurrency stocks surged after President Donald Trump survived an assassination attempt at a Pennsylvania rally, as investors predicted the incident would help propel him to victory over presumptive Democratic nominee Joe Biden in November’s presidential election.
A few weeks later, President Trump’s speech at the 2024 Bitcoin Conference in Nashville, Tennessee, in which he claimed that if re-elected, the United States would become the “cryptocurrency capital of the planet,” also boosted stock prices.
Recently, Morgan Stanley reportedly told financial advisors that it may begin pitching a Bitcoin ETF to its high-net-worth clients, marking a positive shift from a major Wall Street player that has long been skeptical of cryptocurrencies.
However, weak July employment data released on Friday led to a major sell-off after the Federal Reserve decided to keep interest rates unchanged earlier in the week.
Analysts said the cryptocurrency’s sharp drop was not unexpected and that crypto-related stocks will likely fluctuate in response to socio-political pressures.
“Bitcoin and cryptocurrency markets will likely fluctuate in response to macroeconomic and election developments for much of the third quarter.” Bernstein analyst Gautam Chughani wrote in a note..
“I’m not surprised that Bitcoin reacted so sharply as it was the only market trading over the weekend,” Chugani said.
Some analysts used Monday’s stock price volatility to advise investors to pursue digital assets directly rather than ETFs or crypto-related stocks.
“If this weekend has reminded us of anything, it’s the importance of investing in digital assets directly on native crypto exchanges,” said Joshua Peck, founder of crypto hedge fund TrueCode Capital.
However, others advise caution when entering the cryptocurrency market in any case.
“This is a stark reminder that Bitcoin, and cryptocurrencies in general, are risk assets and sit at the leading edge of the risk spectrum,” said Tony Sycamore, market analyst at IG.
With post wire
