Bitcoin fell to its lowest level since January on Monday as slumping equity markets continued to hurt cryptocurrencies, which are currently trading in line with so-called riskier assets like tech stocks.
Bitcoin dropped to as low as $33,266 in morning trade, testing the January low of $32,951. A fall below that level would be its lowest since July last year.
It then steadied to trade around $33,500, down 1.4%.
“I think everything within crypto is still classed as a risk asset. And similar to what we’ve seen with the Nasdaq, most cryptocurrencies pummelled.” said Matt Dibb, COO of Singapore-based crypto platform Stack Funds
The tech-heavy Nasdaq fell 1.5% last week and has lost 22% year to date, hurt by the prospect of persistent inflation forcing the US Federal Reserve to hike rates despite slowing growth. Nasdaq futures were down a further 0.8% in Asia trade on Monday morning. MKTS-GLOB
Dibb said other factors in the decline over the weekend – bitcoin closed on Friday at around $36,000 – were the crypto market’s notoriously low liquidity over the weekends, and also short-lived fears that an algorithmic stable coin called Terra USD (UST) could lose its peg to the dollar.
Stablecoins are digital tokens pegged to other traditional assets, often the USÂ dollar.
Crypto community closely watches UST both because of novel way in which it maintains its 1:1 dollar peg. Because its founders have set out plans to build reserve of $10 billion worth of bitcoin to back the stablecoin. This means volatility in UST could potentially spill over into bitcoin markets.
Ether, the world’s second-largest cryptocurrency, underpins the Ethereum network. It fell as low as $2,421 on Monday, its lowest since late February.
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