Cryptocurrencies are suffering from the effects of risk aversion in the global market. Bitcoin, the largest cryptocurrency, briefly dropped over 16%, falling below $50,000, marking its largest decline since November 2022. Ethereum, the second-largest, also saw a drop of 23%, its largest decrease since 2021.
As of 8:39 AM London time on the 5th (4:39 PM Japan time), Bitcoin was down 11% at $52,680. It had fallen 27% over the prior seven days, its largest weekly decline since the collapse of crypto exchange FTX.
After dropping more than 20%, Ethereum somewhat recovered to $2,342. Most major cryptocurrencies are being significantly sold off.
Underlying this is growing concern about the outlook for the U.S. economy and doubts over whether large-scale investments in artificial intelligence (AI) will meet expectations, causing a global stock market downturn to accelerate. Rising geopolitical tensions in the Middle East are also exacerbating investor anxiety.
On the 2nd, U.S. Bitcoin exchange-traded funds (ETFs) experienced their largest outflow of funds in about three months.
According to Hayden Hughes, head of the cryptocurrency investment division at Evergreen Growth, a family office in Singapore, cryptocurrencies are suffering from the impact of a reversal in yen carry trades as speculators adjust to rising interest rates in Japan. Hughes noted, “These investors are also struggling with a significant increase in hedging costs based on the volatility of dollar-yen trades.”
Original title: Bitcoin Plunges, Ether Has Worst Drop Since 2021 as Crypto Sinks (Excerpt)
(Updates with the latest market prices)