Crypto Market Decline Intensifies Amid Weak Economic Data and Reduced Risk Appetite
U.S.-listed shares of crypto-related companies took a significant hit as Bitcoin plummeted more than 15% on Monday. This drop followed last week’s weak economic data, which stoked recession fears and triggered a broad sell-off of risky assets.
The sharp downturn marks a dramatic reversal for the crypto sector, which had been buoyed by optimism surrounding the recent approval of exchange-traded funds (ETFs) linked to the spot prices of Bitcoin and Ether, the two largest cryptocurrencies.
Sentiment had also been lifted by pro-crypto remarks from Republican presidential candidate Donald Trump at a Bitcoin conference last month. However, the release of data indicating higher unemployment and declining manufacturing activity led to a pullback in risky investments.
“We are not surprised by Bitcoin’s snap reaction as the only weekend-traded market. We don’t see any incremental negatives for crypto here,” said Gautam Chhugani, an analyst at Bernstein, in a note.
“The Bitcoin and crypto market will likely trade based on macroeconomic and election cues throughout the third quarter.”
Shares of crypto miners, including CleanSpark, Bitfarms, Riot Platforms, and Marathon Digital, fell between 12% and 25% in early trading. Coinbase shares dropped 18%, while Bitcoin buyer MicroStrategy saw a nearly 23% decline.
Bitcoin fell to its lowest level in nearly six months, while Ether plunged 19%, trading at levels not seen since January.
BITCOIN OVER ETFs
The growing correlation with equities has weakened Bitcoin’s status as a safe-haven asset. However, some analysts argue that investing directly in Bitcoin is still preferable to gaining exposure through ETFs and crypto-related stocks.
“This weekend serves as a reminder of the importance of investing in digital assets directly on native crypto exchanges,” said Joshua Peck, founder of crypto hedge fund TrueCode Capital. “While others were stuck waiting for the futures market to open on Sunday night… we were calmly executing our strategy without interruption.”
Nevertheless, caution is still advised. “It’s a big reminder that Bitcoin and crypto, in general, are risk assets and sit at the pointy end of the risk spectrum,” said Tony Sycamore, a market analyst at IG.
