Bitcoin hit its lowest in six months on Saturday, prolonging the sharp decline recorded in the previous session, when the cryptocurrency market was swept by a powerful outflow by investors from speculative assets.
The price of the largest digital token by market cap dropped 4.3% Saturday morning in Europe to $35,127, the lowest since July 2021. Bitcoin has now lost nearly a quarter. of its value this year.
Other cryptocurrencies are also under intense selling pressure, with the Financial Times Wilshire index of the top five tokens, excluding bitcoin, down 30% in the first month of 2022.
The cryptocurrency debacle comes as investors dumped tech stocks in anticipation that the U.S. Federal Reserve will rein in the expansionary monetary policy adopted during the pandemic to fight inflation. Global stocks saw their biggest declines in more than a year this week, as fast-growing companies, which have spurred the recovery from the deep coronavirus crisis, suffered sharp declines.
Investors now expect the Fed, the world’s most influential central bank, to raise interest rates three or four times this year, which has already lifted bond yields. Higher yields on low-risk assets like U.S. government bonds make the potential returns earned through speculative investments like cryptocurrencies seem less attractive, analysts say.
Andrew Sullivan, managing director of Outset Global in Hong Kong, said on Friday that Asia was seeing “huge volumes passing through various markets as investors flock to cash” as shares of technology in the region.
The strong sell-off of digital assets also came a day after the Russian central bank announced on Thursday preliminary proposals aimed at banning all cryptocurrency trading and mining. The proposed regulations would also block cryptocurrency investment by banks and ban any exchange of cryptocurrency for traditional currencies in Russia, one of the world’s largest centers for cryptocurrency mining.
The Russian central bank said in a 36-page report that the rapid rise in value of cryptocurrencies “is mainly defined by speculative demand for future growth, which creates bubbles”, adding that they “also have aspects of financial pyramids, because their growth from pricing is largely supported by demand from new market participants”.
The announcement initially had little impact on bitcoin, which rose as much as 3.7% against the dollar on Thursday. But on Friday afternoon in Asia the cryptocurrency was down more than 10% from the previous day’s high, reaching its lowest level since August.
“Russian regulators are frustrated [com a indústria de criptomoedas] several years ago, and none of their warnings were heeded,” said Vince Turcotte, Asia Pacific Sales Director for Eventus Systems.
He added that the Russian proposal, while “relatively tougher”, was just the latest in a series of cryptocurrency announcements by regulators around the world focused primarily on protecting retail investors.
Turcotte compared the situation in Russia to that in China before Beijing began a tougher crackdown on the industry. “Nobody heard [as autoridades chinesas] until they actually dropped the hammer,” he said. Last year, China declared all cryptocurrency activities illegal.
Translated by Luiz Robert M. Gonçalves
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