(May 15): A selloff in risker assets like stocks swept up cryptocurrencies as concerns over inflation and high oil prices rattle jittery investors.
Bitcoin, the largest digital token, fell as much as 3.4% on Friday to around US$78,600, its lowest in two weeks. It’s on pace for its first down week since the end of March. Other coins were also hit, with Ether losing nearly 4% at one point to drop to US$2,200. The crypto declines came in tandem with drops in stock and bond markets.
Nervous traders are contending with the possibility that central banks will be forced to tighten policy to keep inflation in check as the US’s conflict with Iran continues to drag on. The effective closure of the Strait of Hormuz, through which about a fifth of the world’s oil used to travel through, has weighed on sentiment and sent oil prices higher.
“Global bonds are selling off, pushing interest rates higher and fueling risk-off action in speculative instruments like cryptocurrencies,” said Michael O’Rourke, chief market strategist at Jonestrading.
While crypto proponents have frequently argued that digital tokens could be useful as a safe haven during periods of turmoil, this year’s 11% drop in bitcoin has undermined that thesis.
The drawdown this week comes even as cryptoassets have been buoyed by a slew of positive news, including the advancement by the Senate Banking Committee of a landmark US digital-asset market-structure bill that could provide much-needed regulatory clarity.
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Even before Friday’s selloff, bitcoin had stalled around US$80,000 in recent weeks as retail investors stayed on the sidelines, having seen the token fall from above US$126,000 in early October. Some of the action has shifted to some prediction markets, where trading has boomed.
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