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(Bloomberg) – Cryptocurrency prices collapsed as a wide sell-off sparked by concerns about the China Evergrande group’s contagion swept through global markets.
Bitcoin fell 10.7% to $ 42,522 during New York trading hours, reaching the lowest level since early August. This point is also lower than its low on September 7, when the coin fell 17% in less than an hour. Other digital assets fell as well, with Bitcoin Cash, EOS, and Ether all falling.
The losses reflected the action in the broader market as investors weighed the risks from Evergrande’s debt problems and this week’s Federal Reserve meeting. US equity futures showed losses at the opening and the Stoxx Europe 600 index fell as much as 2%, on track for the biggest drop since July.
The speed of the plunge has likely accelerated, as more than 249,000 traders have had their accounts liquidated in the past 24 hours, which equates to roughly $ 1.23 billion worth of crypto, according to data from Bybt, a platform. crypto futures trading and information.
“Some attributed the sudden drop to the current situation of Evergrande in China, which has already caused turmoil in traditional markets,” wrote Jonas Luethy, a trader at GlobalBlock, the UK-based digital asset brokerage. “Analysts have suggested that a turbulent week is ahead, with a potential pullback to $ 41,000.”
While Bitcoin does not always trade in tandem with financial markets – a feature that made it a tempting proposition from a portfolio diversification perspective – its correlation on a 30-day basis with futures on the Nasdaq 100 has always been positive. since February of last year. A reading of 0.5 – which it’s close to now – means they’re moving in the same direction quite often these days.
Investors say that while a link to tech stocks makes sense – both types of investments can be seen as attractive to the same pool of tech-savvy investors – strong correlations appear for small-cap stocks as well. and the S&P 500. This is likely because, as Bitcoin further integrates into global financial markets, it should respond more to the changes in risk appetites that are fueling global sentiment.
Meanwhile, President of El Salvador Nayib Bukele said the country had “bought the bitcoin down”, adding 150 tokens to bring its total holdings to 700, or roughly $ 32 million on a price basis. current. The nation recently adopted Bitcoin as legal tender in a controversial move that has encountered technical issues and protests.
El Salvador’s enthusiastic adoption of Bitcoin is one of the reasons prices have risen and recently hit a four-month high. Still, the market still has a ways to go before it recovers its losses from a massive sell off in May.
“On a day like today, when you have the perfect storm, I think people are just wondering, ‘What can I sell the fastest? »What do I have access to at 2 am? Said Scott Bauer, Managing Director of the Prosper Trading Academy. “If they have crypto, which is obviously a 24 hour market, it might be the first place they look,” he said, adding that the news from China is negative. for the crypto space.
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