CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

Crypto news: Bitcoin mimics US equities as sell-offs continue

By Daniela Ešnerová


Updated

Candlestick chart crypto exchange finance market data graph
Cryptoverse unaffected by the US Fed’s taper confirmation – Photo: Shutterstock

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.

ETH/USD

3,119.44 Price
+6.160% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00

BCH/USD

486.05 Price
+9.040% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.50

BTC/USD

66,983.55 Price
+2.560% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

DOGE/USD

0.16 Price
+4.160% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.0012872

“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.

What is your sentiment on BTC/USD?

66983.55
Bullish
or
Bearish
Vote to see Traders sentiment!

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

Top coins by market capitalisation

As of 10:00 GMT

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

BNB/USD
Binance Coin / USD
587.42 USD
13.78 +2.430%
BNB/USD
Binance Coin / USD
587.42 USD
13.78 +2.430%
BTC/USD
Bitcoin / USD
66983.55 USD
1670.5 +2.560%
ETH/USD
Ethereum / USD
3119.44 USD
180.85 +6.160%

Rate this article

Related reading

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided in this article is for information purposes only and should not be understood as investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents and has not been prepared in accordance with the legal requirements designed to promote investment research independence. While the information in this communication, or on which this communication is based, has been obtained from sources that Capital.com believes to be reliable and accurate, it has not undergone independent verification. No representation or warranty, whether expressed or implied, is made as to the accuracy or completeness of any information obtained from third parties. If you rely on the information on this page, then you do so entirely at your own risk.

Still looking for a broker you can trust?

Join the 610,000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading