Bitcoin is under pressure from a bout of risk aversion in global markets that saddled the largest digital asset with its heftiest weekly loss since the collapse of the FTX exchange in 2022.
The original cryptocurrency sank more than 12% at one point before paring some of the decline to trade at $52,777 as of 11:15 a.m. in Singapore on Monday. The token lost 13.1 per cent in the seven days through Sunday, the most since the period of FTX’s bankruptcy. Smaller tokens such as Ether and meme-crowd favorite Dogecoin also nursed heavy losses.
The declines come as a global stock selloff intensifies, reflecting concerns about the economic outlook and questions over whether heavy investment into artificial intelligence will live up to the hype surrounding the technology. Geopolitical tension is rising in the Middle East, adding to investor skittishness.
Bitcoin exchange-traded funds in the US suffered their largest outflows in about three months on Aug. 2. The digital asset has also tumbled through its 200-day moving average price.
The latter technical chart pattern “opens the way for a deeper pullback” toward $54,000, Tony Sycamore, market analyst at IG Australia Pty, wrote in a note.
Bitcoin has been buffeted by a range of factors since hitting a record of $73,798 in March, including shifting political fortunes in the US as pro-crypto Republican Donald Trump and Democratic opponent Vice President Kamala Harris — who has yet to detail a digital-asset policy stance — lock horns in the presidential race.
Also hanging over the market are possible sales of Bitcoin seized by governments and the risk of a supply overhang from tokens returned to creditors through bankruptcy proceedings.
Bond traders have amplified bets on US interest-rate cuts beginning in September to support economic expansion. The recent upheaval in traditional markets “increases the likelihood of less restrictive monetary policy coming sooner rather than later — a good thing for crypto,” argued Sean Farrell, head of digital-asset strategy at Fundstrat Global Advisors LLC.
Bitcoin’s year-to-date advance has moderated to approximately 25 per cent, compared with an 18 per cent climb in gold and a 9 per cent jump in a gauge of global stocks.
Global bonds erase this year’s loss as US economic outlook sours
Global bonds have erased their losses for the year as concern the US economic outlook is rapidly worsening spurs demand for fixed-income assets.
Bloomberg’s index of global sovereign and corporate debt has now gained 1 per cent for 2024 after being down as much as 4.6 per cent in the middle of April. The gauge surged 2.3 per cent last week alone. Bond markets took another jump Friday when monthly US payroll data showed hiring slowed and the jobless rate climbed to a three-year high.
Gains in US Treasuries are lifting all boats, with even Japanese government bonds rallying despite the policy divergence between the US and Japan, said Winson Phoon, head of fixed-income research at Maybank Securities Pte in Singapore. “Markets have been too complacent of risk assets and the recent data weakness in US jobs is a timely wake-up call.”
Treasury 10-year yields slid as much as seven basis points in Asia Monday after tumbling 19 basis points in New York following the worse-than-expected US payrolls report. Japan’s 10-year benchmark yield tumbled as much as 17 basis points, while similar-maturity New Zealand yields slipped six basis points. Australia’s cash bond markets are shut for a holiday, but three-year futures surged to the highest since June 2023.
“Japanese stocks are being taken to the woodshed, absolute chaos there this morning and it’s setting off a renewed bid for global fixed income,” said Prashant Newnaha, a senior rates strategist at TD Securities in Singapore. “Expect plenty of chop, but ultimately this leg lower in US yields has further room to run.”
Traders are boosting bets on Fed policy easing following the recent spate of weak data. US overnight indexed swaps are now pricing in more than 100 basis points of rate cuts by year-end, compared with just two full quarter-point moves being expected a week ago. Economists at Citigroup Inc. and JPMorgan Chase & Co. are both now predicting the Fed will lower its benchmark by a half-point at both its September and November meetings.
Some in the market see the recent bond market moves as over-extended, and one that may lead to a pullback and further volatility.
Australian bond futures are signaling aggressive easing, although labor market conditions do not suggest the need for “policy easing of that severity,” said Philip McNicholas, Asia sovereign strategist at Robeco in Singapore. “To me, that signals more volatility lies ahead and strategic directional calls on rates markets are going to be more difficult to discern.”
