Bitcoin, Ether Tumble in the Biggest Decline Since FTX Collapse

(Bloomberg) -- Cryptocurrencies reeled from a bout of risk aversion in global markets on Monday, at one point sending Bitcoin down more than 16% and saddling second-ranked Ether with the steepest fall since the collapse of FTX in 2022.

Top token Bitcoin traded 9% lower at $53,883 as of 4:51 p.m. in New York, adding to a 13.1% drop last week that was the worst since the period when the FTX exchange imploded. Ether shed over a fifth of its value before paring some of the slide to change hands at $2,419. Most major coins nursed losses. 

Crypto-related stocks tumbled. Coinbase Global Inc., the largest US exchange, fell 7.3%, Bitcoin proxy MicroStrategy Inc. plunged almost 10%, and miners Marathon Digital Holdings Inc. and Riot Platforms Inc., each slumped for a sixth consecutive trading session. 

The declines come as a global stock selloff intensified, reflecting concerns about the economic outlook and questions over whether heavy investment into artificial intelligence will live up to the hype surrounding the technology. Geopolitical tension is rising in the Middle East, adding to investor skittishness.

Total liquidations in bets on crypto were about $1.1 billion in the past 24 hours, one of the largest since early March this year, with $814 million and $263 million in bullish and short positions respectively, according to Coinglass data.

US exchange-traded funds for Bitcoin suffered their largest outflows in about three months on Aug. 2. One question is whether the products will attract dip buyers when they resume trading, or witness a deeper efflux.

Overall, Bitcoin and Ether investment products saw outflows of $400 million and $146 million, respectively, in the week ended Aug. 3, according to CoinShares Ltd. data. 

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Carry Trade

Digital assets are a victim in part of the unwinding yen carry trade, as speculators adjust to higher interest rates in Japan, according to Hayden Hughes, head of crypto investments at family office Evergreen Growth.

“Those investors are also fighting a drastic increase in hedging costs based on the volatility in the US dollar-Japanese yen trading pair,” Hughes said.

Bitcoin has been buffeted by a range of factors since hitting a record of $73,798 in March. That includes US political flux as pro-crypto Republican Donald Trump and Democratic opponent Vice President Kamala Harris — who has yet to detail a digital-asset policy stance — lock horns in the presidential race.

Also hanging over the market are possible sales of Bitcoin seized by governments and the risk of a supply overhang from tokens returned to creditors through bankruptcy proceedings.

Fed Outlook

Bond traders have amplified bets on US interest-rate cuts beginning in September to support economic expansion. The prospect of less restrictive monetary policy is actually “a good thing for crypto,” argued Sean Farrell, head of digital-asset strategy at Fundstrat Global Advisors LLC.

The Bitcoin retreat at its nadir Monday left the token at levels last seen in February. Ether, meanwhile, earlier fell back to prices previously seen at the turn of the year. Similar to Bitcoin, one unknown is how investors in new US spot-Ether ETFs will react.

Justin D’Anethan, head of Asia-Pacific business development at market maker Keyrock, said the crypto rout appeared somewhat Ether-led, flagging social-media rumors of institutional-selling of Ether-related assets.

Khushboo Khullar, a venture partner at Lightning Ventures, which invests in Bitcoin-linked companies, said the broad stock slump had caused some “panic,” spurring investors to rush for liquidity to settle margin calls. She argued the crypto retreat is a “fine buying opportunity.”

“Technical indicators however are now showing as oversold, as well as the Crypto fear and Greed index flashing ‘Fear’, which is usually a sign of a bottoming of the price,” said Simon Peters, crypto analyst at eToro. “It is possible we could see a rebound from here over the coming days, as to how high the price will rebound we have to wait and see.”

Bitcoin’s year-to-date advance has moderated to approximately 29%, compared with an 17% climb in gold and an 8% jump in a gauge of global stocks.

--With assistance from Emily Nicolle, David Pan and Benjamin Taubman.

(Updates with fresh pricing, additional comment)

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