Bitcoin fell below $ 30,000 for the first time since July as rising interest rates forced investors to flee the riskiest corners of global financial markets.
The world’s most widely traded digital token fell to $ 29,730 in Asian trade on Tuesday, according to Refinitiv, before recovering to about $ 32,000 in European activity. It has fallen by more than 50 percent from the highest level reached in November.
Other digital assets have also come under strong pressure in recent weeks, pushing the market value of the first 500 digital assets by half from a record 2021 in November 2021 to $ 1.6 trillion, according to CryptoCompare data collected by the Financial Times.
The decline in cryptocurrencies comes as investors have given up speculative financial assets after a wave of rising interest rates from global central banks has disrupted markets. Other risky assets, such as stocks in loss-making companies and unwanted bonds, were also under pressure, but cryptocurrencies were particularly hard hit.
The cryptocurrency market is booming as central banks raise interest rates to record lows in the midst of the coronavirus crisis, sending traders to look for assets that provide strong returns. However, the big sell-off in global government bond markets this year has led to higher yields, increasing the potential returns that investors can gain from holding high-quality debt.
“This is a risk for all asset classes, including crypto,” said Daniel Ives, a strategist at Wedbush Securities, who added that “there is nowhere to hide.”
As a sign of how deep the losses are for the cryptocurrency market, a FT Wilshire gauge tracking the top five digital coins, excluding bitcoin, fell more than 70% from its recent peak. Once-fast-growing tokens like Solana, charged as an alternative to the Ethereum network, are rapidly declining in value.
Quoted shares of companies exposed to cryptocurrency also fell. MicroStrategy, led by crypto defender Michael Sailor, has fallen 60 percent this year. Coinbase fell 67 percent in 2022, falling below $ 100 on Monday for the first time since the exchange went public in New York in April 2021.
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Bitcoin mining companies such as Bitfarms and Marathon Digital Holdings, which use powerful computers to solve puzzles that are offset by digital tokens, have also fallen sharply.
The withdrawal also highlighted how the effectiveness of bitcoin and other cryptocurrencies is closely linked to the US stock market. The relationship between bitcoin and the Nasdaq Composite, a measure that weighs on major US technology companies, has reached record highs, according to data provider Kaiko.
“Some investors are playing cryptocurrency as a hedge against inflation, but they are trading like Nasdaq’s Siamese twin,” Ives said.
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