Bitcoin crashes along with tech stocks – what triggered the crash?
Bitcoin fell sharply on Monday and continued its decline in the early Tuesday session as traders feared its excessive valuations after a 100 percent surge this year.
The benchmark cryptocurrency lost more than $8,000, or 13.91 percent. At its low for the week so far, BTC changed hands for as much as $46,700. Bitcoin’s closest Bitcoin Supersplit market rivals (Go to Plus500 Bitcoin buying guide), Ethereum and Binance Coin, also fell by 20 and 17 per cent respectively over the same period.
Bitcoin slips after hitting record high. Source: BTCUSD on TradingView.com
Corporate boom in the bitcoin space
All the aforementioned assets traded at record levels before posting broad declines. This sparked concerns among traders that the cryptocurrency market was capitulating – a reminder of the 2018 crash that followed a supersonic bull run the previous year.
Such assets drove the cryptocurrency market’s recovery from a sell-off triggered by the coronavirus pandemic in March last year. They also became a favourite for retail investors who jumped into options trading during the lockdowns.
The retail investor boom got a further tailwind when Wall Street began to take an interest in bitcoin (To buy bitcoin cheap platform comparison) as a bet against inflation.
In recent months, MicroStrategy – a publicly traded software intelligence firm – has increased its Bitcoin reserves to more than 71,000. Tesla, a Fortune 500 company, also bought $1.5 billion worth of Bitcoin in February – a move that pushed the cryptocurrency’s market capitalisation above $1 trillion for the first time in history.
Meanwhile, PayPal launched a crypto-enabled service on its traditional payments platform. Mastercard announced its entry into the emerging space.
Bank of New York Mellon made a similar decision, saying it will integrate bitcoin custody services into the platform its customers use for traditional securities and cash.
Return on investment
Bitcoin’s acceptance on Wall Street boomed as companies and investment firms speculated on the cryptocurrency’s emerging role as a safe-haven asset amid global economic uncertainty.
This week’s sell-off had no clear catalyst, but it appeared as US Treasury yields rose. Recently, investor confidence has been growing for a sustained recovery in the US economy.
Government bond yields fell and rose as they moved in the opposite direction to interest rates. This increases the attractiveness of government bonds and reduces the appeal of riskier assets such as Bitcoin.
The yield on the benchmark US 10-year Treasury note rose to 1.367 per cent on Monday from 1.338 per cent, its highest level since February last year. That led to a fall in tech stocks, which, like bitcoin, were trading near their record highs.