Crypto news: Bitcoin mimics US equities as sell-offs continue
Updated
Bitcoin (BTC) was trading around $36,000 level in London morning trade, after getting rejected at the $39,000 mark. The combined market value of all virtual tokens went down 2.5% over the last 24 hours.
The cryptocurrency market’s reaction to the US Federal Reserve’s confirmation on Thursday that the agency would end the asset-purchases programme by March was muted as it had largely factored in the decision.
The cryptocurrency market has been on a downfall since November when the Fed first announced tapering. Bitcoin is now down 42% since 3 November, when the taper was first announced. Cryptocurrencies had previously benefited from an era of quantitative easing, which helped to drive flows into the market.
Crypto correlation to equities
BTC was not immune to recent volatility, sparked by the Fed’s monetary tightening intentions and geopolitical tensions – much like the traditional markets. BTC’s correlation with the Nasdaq and S&P 500 stock indices have hit an 18-month high, according to research firm Kaiko.
Kaiko’s research director Clara Medalie said that Bitcoin tended to be more tightly correlated with traditional financial assets during times of macro uncertainty. The last time she saw correlations this high was during the initial rollout of pandemic-era monetary policy in mid-2020, she said.
“Bitcoin has previously experienced higher correlations to equities, thus there is no certainty that the positive trend we see today will last…It is important to note that over the past year, bitcoin has traded in a very wide range—sell-offs are a normal part of the bitcoin lifecycle at this point,” she adds.
“Digital assets including Bitcoin tend to become more correlated with stocks during stress periods when most of the investment markets go risk-off,” agrees Mikkel Morch, executive director and risk management at crypto/digital assets hedge fund ARK36.
He added that he was not surprised when the crypto markets moved almost in tandem with the stock market following Fed Chair Jerome Powell’s press conference in the aftermath of this month’s federal open market committee meeting.
“The markets’ first reaction was positive and optimistic as the market participants had clearly expected a much more hawkish stance from the Fed. However, while Powell did indeed sound dovish at the beginning, it seems that he failed to offer enough reassurance to really turn the tide of the bearish sentiment that has gripped the markets since last week. That’s why the initial enthusiasm started waning soon after and Bitcoin – along with other major digital assets – struggled to defend its gains following an initial spike,” added Morch.
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Other news: Putin seeks crypto consensus
President of Russia president, Vladimir Putin, invited the government and the central bank – Bank of Russia – to seek consensus on regulating vs. banning cryptocurrencies, Reuters reports. On Thursday, Putin opened his virtual conference with his government members by “starting with an issue that is currently in the spotlight — the regulation of cryptocurrencies.”
Last week, Russia’s central bank had put forward a proposal to ban cryptocurrencies, citing financial instability and consumer protection among the reasons behind their proposed ban.
On 25 January, Russia’s finance ministry official Ivan Chebeskov seemed to contradict the stance by saying. “The world has become very virtualised and I don’t think we can allow ourselves to just take a high-tech industry and ban it. We don’t want these technologies to leave the country, they should absolutely be developed inside the country,” he said.
Yesterday, Putin invited the government to meet with the central bank to seek consensus on the issue. He acknowledged ”certain risks, first and foremost to citizens of the country, given significant volatility,” but concluded: “We do have some competitive advantages here, especially in so-called mining. I am referring to surplus electricity and the well-trained personnel available in the country.”
Quote of the day
Eric Trump, son of the former US president Donald Trump and businessman tweeted
Fraud Alert: It has come to our attention that someone is promoting a crypto currency called "TrumpCoin" (Symbol "TRUMP.") This has NOTHING to do with our family, we do not authorize the use and we are in no way affiliated with this group. Legal action will be taken.
— Eric Trump (@EricTrump) January 24, 2022
Top coins by market capitalisation
As of 10:00 GMT
- Bitcoin (BTC) was down 3.1% and trading at $36,538.08
- Ether (ETH) lost 2.31% to $2,445.24
- Binance coin (BNB) decreased 3.72% to $370.68
Winners and losers
- Altcoins theta network (THETA) and helium (HNT) rallied, adding 10.74% and 6.43% over the last 24 hours respectively
- Solana (SOL) was down 33.92% week-on-week
Markets in this article
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