Cryptocurrencies

Crypto Sell-Off Deepens as Weak Economic Data Damps Risk-Taking, Reports Reuters

Shares of U.S.-listed companies linked to cryptocurrency experienced a sharp decline as bitcoin dropped over 15% on Monday. This decline followed disappointing economic data from the previous week, which reignited concerns about a potential recession, resulting in a significant sell-off of riskier assets.

This downturn represents a dramatic shift for the crypto sector, which had been enjoying a period of positive sentiment due to the approval of exchange-traded funds (ETFs) associated with the spot prices of bitcoin and ether— the two leading cryptocurrencies. Additionally, a recent pro-crypto speech by Republican presidential candidate Donald Trump at a bitcoin conference had further fueled optimism. However, the latest data revealing rising unemployment and sluggish manufacturing has put pressure on these higher-risk investments.

Bernstein analyst Gautam Chhugani commented that the market’s abrupt reaction was expected, given its unique weekend trading status. He noted there were no new significant negative factors for the crypto landscape, predicting the bitcoin and crypto market would continue to react to macroeconomic and electoral developments for much of the third quarter.

Crypto mining companies such as CleanSpark, Bitfarms, Riot Platforms, and Marathon Digital saw their shares drop between 12% and 25% in early trading. Meanwhile, Coinbase’s stock fell by 18%, and MicroStrategy, a significant bitcoin buyer, experienced a nearly 23% decline. Bitcoin sank to its lowest point in almost six months, while ether saw a drop of 19%, reaching levels not seen since January.

Bitcoin’s increasing correlation with equity markets has raised questions about its status as a safe-haven asset. Some analysts suggest that directly investing in cryptocurrencies might still be a more favorable option than through ETFs and crypto-related stocks. Joshua Peck, founder of TrueCode Capital, emphasized the benefits of trading digital assets on native crypto exchanges, highlighting the flexibility it offers.

Despite some positivity regarding direct investment, caution is warranted. Market analyst Tony Sycamore noted that the current situation serves as a stark reminder that bitcoin and cryptocurrencies in general are considered high-risk assets, positioned at the edge of the risk spectrum.

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