This is becoming a more common phenomenon: when stocks fall, so does bitcoin.
Bitcoin, the world’s largest cryptocurrency by market cap, fell below $37,000 on Friday to its lowest dollar value since August 2021, according to CoinDesk. The sell-off continued over the weekend, dropping to $34,707.05 on Saturday afternoon. Bitcoin is down 49% from its record in November 2021.
After the afternoon rally in the stock market on Thursday, the fall came sharply.
Cryptocurrencies and stocks have fallen together since the start of the year, responding to investor concerns about how a series of Federal Reserve interest rate hikes will propel the markets through.
“Cryptocurrencies are no longer an isolated risk asset and are responding to changes in global policy,” said Clara Medley, research director at crypto market data provider Caico. “It should come as no surprise that both will become more volatile as the liquidity tap closes.”
A measure of how bitcoin is intertwined with the markets: According to Kaiko, the cryptocurrency is nearing its highest correlation with the stock market since September 2020. This means that when the stock market goes down, so does bitcoin.
When bitcoin and other cryptocurrencies move according to their own impulses, that movement tends to fluctuate over time, with longer stretches.
Wider adoption of cryptocurrencies among investors may make them more vulnerable to sell-offs in stocks.
The drop in the dollar value of bitcoin on Friday coincided with a 20% drop in Netflix shares, which wiped out more than $40 billion of market capitalization. The streaming giant said it expects to add a much smaller number of subscribers this quarter than a year ago.
Some analysts suggest that the selloff between popular tech stocks could prompt investors to liquidate positions in their crypto holdings in order to limit overall losses and meet margin calls, borrowing money from brokers. Demand to post cash to cover potential losses on trades made from
“We have seen this happen before. Bitcoin is such an excellent store of liquidity that it is pulled at the time of margin calls,” said Chris Bendiksen, head of research at CoinShares, a London-based asset-management firm.
Shares of cryptocurrency stocks tracking bitcoin’s performance also fell on Friday. Cryptocurrency exchange Coinbase Global dropped 13%. MicroStrategy, which makes commercial software but has invested billions of dollars in bitcoin and whose chief executive, Michael Saylor, a vocal advocate of the cryptocurrency, lost 18%.
This story has been published without modification to the text from a wire agency feed
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