Bitcoin's sharp decline - Why is the sense of risk prevailing in global markets?!
Bitcoin's price has suffered a significant drop this week amid a broad sell-off in riskier assets. The world's largest crypto token has fallen more than 8% in the past two days to just above $88,000 (€83,626) during Wednesday's Asian session, its lowest level since November 15.
Bitcoin fell nearly 20% from its peak in the midst of Trump's inauguration on January 20. Alongside Bitcoin's sell-off, other major tokens, such as Ethereum, Cardano, and Solana, have all fallen by more than 10% over the same time period.
Risk sentiment has been a key driver of the sharp decline in cryptocurrencies as economic data worsened in the US, while Trump's escalating tariff threats and a series of political developments increased uncertainties in financial markets.
Additionally, a major crypto hack targeting Dubai-based exchange Bybit has raised concerns about blockchain security. Markets were also waiting for a new catalyst to reignite enthusiasm for cryptocurrencies.
The U.S. technology sector, which usually moves in tandem with cryptocurrencies, has been the worst performer on Wall Street recently. Tesla shares fell more than 8% on Tuesday after news that sales of its cars nearly halved in Europe last month, weighing on the performance of the broader sector. Nvidia earnings will be closely watched later today.
Moreover, the latest US economic data showed that consumer confidence fell the most since August 2021 this month, reflecting a weakened economic outlook amid a slew of tariff announcements by Trump, particularly on the US's two largest trading partners, Mexico and Canada.
Signs of a resurgence in inflation, coupled with the Fed’s dovish stance, have also weighed on market sentiment. “On the surface, it’s about weak data and uncertainty stemming from the Trump administration’s policy agenda and how that might impact economic activity,” said Kyle Rodd, a senior market analyst at Compital.com Australia.
Risk dominated global markets across all asset classes on Tuesday, with stocks extending losses, oil prices falling, gold retreating and the U.S. dollar weakening. Government bond yields fell sharply, with the 10-year U.S. Treasury yield falling to its lowest level since mid-December last year. Government bonds are considered a safe-haven asset because yields move inversely to bond prices.
Investor confidence in cryptocurrencies has been shaken after the largest crypto hack targeting Bybit on February 21 , in which around $1.5 billion worth of Ether was stolen. Ether powers the Ethereum blockchain network. The Dubai-based platform is one of the largest crypto exchanges in the world, with an average daily trading volume exceeding $36 billion.
Bybit CEO Ben Zhou posted on X that a hacker had taken control of an Ether cold wallet and transferred all the tokens to an unknown address. However, he assured investors that the company would cover the loss and that all withdrawals remained open.
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