Bitcoin drops as Wall Street shares tumble
The gold plated souvenir cryptocurrency Tether (USDT), Bitcoin and Etherium coins are arranged beside a screen displaying a trading chart in this photo taken in London, May 8. Tether (USDT) is an Ethereum token known as a stablecoin that is pegged to the value of the US dollar, and is currently the largest stablecoin, having a market value of $83 billion dollars. AFP-Yonhap
Bitcoin plunged to its lowest level since July 2021, Monday, dropping in tandem with slumping U.S. equity markets amid concerns about the Federal Reserve's aggressive tightening path.
The world's largest cryptocurrency by market capitalization, bitcoin dropped to as low as $30,331.28, falling for a fifth consecutive session. Bitcoin was last down 9.8 percent at $30,724.
Bitcoin has dropped 19 percent so far in May, losing more than half of its value since hitting an all-time high of $69,000 in November last year.
The SP 500 hit its lowest level since April 2021, Monday, led by declines in mega-cap growth shares. The Nasdaq was down more than 3 percent, as Apple shares fell more than 3 percent ― the biggest weight on both markets.
Alex Miller, chief executive officer of Hiro, believes "volatility in the market stems from speculation. And because bitcoin is so speculative, its price and the rest of the crypto market is dropping alongside the general markets."
Hiro builds developer tools for Stacks, the network enabling applications and smart contracts for bitcoin.
Ether, the world's second-largest cryptocurrency used for the Ethereum blockchain, fell as low as $2,245, its lowest since late January.
"The most important thing to do to prep for bear markets is to have maintained a balanced portfolio and not overinvest in assets that you can't afford to wait out a crypto winter with," Miller said. "As we've seen from every downturn ever, the best thing you can do with long-term assets like bitcoin is hold, or even increase your position if you're set up to do that."
Despite bitcoin's price weakness, funds and products linked to it posted inflows last week of $45 million, according to digital asset manager Coinshares in a report released Monday.
CoinShares investment strategist James Butterfill said investors took advantage of bitcoin's price declines.
The crypto sector overall also posted inflows of $40 million, the CoinShares report showed.
Matt Dibb, chief operating officer of crypto platform Stack Funds, said other factors in bitcoin's decline came over the weekend during the crypto market's notoriously low liquidity.
There were also short-lived fears that algorithmic stablecoin Terra USD (UST) could lose its peg to the dollar, Dibb noted.
Stablecoins are digital tokens pegged to other traditional assets, often the U.S. dollar.
UST is closely watched both because of the novel way in which it maintains its 1:1 dollar peg and because its founders have set out plans to build a reserve of $10 billion worth of bitcoin to back the stablecoin, meaning volatility in UST could potentially spill over into bitcoin markets. (Reuters)