The downturn in the cryptocurrency market over the weekend echoed the downturn in the broader stock market last week as investors moved away from riskier assets.
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The price of bitcoin fell 5.3% to $ 33,879 on Sunday afternoon and is now about half of its highest ever.
It was not immediately clear what caused the downturn, but the collapse of the cryptocurrency market over the weekend echoed the downturn in the broader stock market last week as investors moved away from riskier assets.
Bitcoin, the largest cryptocurrency, peaked at $ 67,802.30 in November 2021. It rose to about $ 34,600 later on Sunday.
The Federal Reserve’s announcement Wednesday that it was raising interest rates by half a point, the biggest increase since 2000 with further increases expected this summer, brought the Dow Jones Industrial Average down 1063 points, or 3.1%, on Thursday. The S&P 500 fell 3.6% and the Nasdaq Composite fell 5%.
The tech Nasdaq Composite hit a 52-week low on Friday, falling to 11,990.15. It has decreased by 22.4% since the beginning of the year.
As part of its efforts to fight high inflation, the Fed is also starting to reduce its $ 9 trillion asset portfolio, but has ruled out raising interest rates by a more aggressive 0.75 percent.
At the same time, “risky assets” such as technology stocks and cryptocurrencies are affected as bond yields continue to rise. The yield on US 10-year benchmark government securities reached 3.15% on Friday, close to its four-year high. Higher bond yields reduce the additional return on bonds that traders expect from riskier bets.
Last week, Fong Le, chief financial officer of MicroStrategy, said in a call on first-quarter earnings that he would face a margin claim if the price of bitcoin fell to $ 21,000. In March, MicroStrategy took out a $ 205 million bitcoin-backed loan with Silvergate Bank to buy more bitcoins, and held $ 5.9 billion in bitcoins at the end of March.
MicroStrategy would withdraw the loan at a 25% loan to value, and a 50% loan to a value of “or about $ 21,000” would trigger a margin claim. The company can import more bitcoins into the collateral package so that it never reaches 50%, “so that we never fall into a margin call situation,” Lee said, according to a transcript of the conference call.
Shares of MicroStrategy have fallen 62% since the price of bitcoin peaked in November and fell 46% since the beginning of the year.
Ether, the second-largest digital asset, fell 6.8 percent to $ 2,491 on Sunday. That’s after a 6% increase on Wednesday to nearly $ 3,000, his best daily performance since February.
Write to Janet H. Cho at janet.cho@dowjones.com
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