Bitcoin Prices Drop to Near 2022 Lows. Why the Weekend Is Key for Cryptos.
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Bitcoin prices haven’t been this low since January.
Dreamstime
Bitcoin
prices neared their lowest levels of the year on Friday as cryptocurrencies suffered from a stock market selloff that spread to digital assets. There’s a chance for more volatility in the day ahead.
The price of Bitcoin fell 8% over the past 24 hours to below $36,200, having notched the biggest one-day drop since January on Thursday. The largest digital asset has been trading around $40,000 for much of this year, remaining well off its all-time high of $68,990 reached in November 2021. Bitcoin bottomed out below $35,900 on Friday, nearing the lowest levels seen in 2022 of near $35,000.
“Negative developments over the weekend could spur a selloff to around $32,000 setting Monday up for a bad start,” said Jeffrey Halley, an analyst at broker Oanda. “If risk sentiment continues plummeting, the chicken bones on the technical charts suggest Bitcoin could be on its way to $28,000 and then $20,000.”
Ether,
the second-largest crypto, notched similar declines. The token underpinning the Ethereum blockchain network lost 7% to trade around $2,70 — its lowest levels since mid-March.
Smaller cryptos, or “altcoins,” were also deep in the red.
Solana
dropped 10%,
Cardano
retreated 9%, and Avalanche was 13% lower. “Memecoins”— called that because they were initially intended as internet jokes rather than significant blockchain projects — also fell, with both
Dogecoin
and
Shiba Inu
some 6% lower.
A plunge in digital asset prices comes on the heels of a stock market selloff.
While Bitcoin and other cryptos should, in theory, trade independently of mainstream financial markets, they have proved to be correlated with other risk-sensitive assets like stocks, and especially technology stocks, over the past few months.
The markers have whipsawed the past few days. On Wednesday, the
S&P 500
and
Dow
both climbed more than 2% in a spectacular rally as the indexes notched their best one-day gains since 2020. Cryptos did well that day too. It all came crumbling down on Thursday when tech stocks and digital assets were some of the worst casualties; the tech-heavy
Nasdaq
tumbled 5%, its worst day in two years.
Investors face a challenging and dynamic monetary policy environment. The Federal Reserve is expected to raise interest rates many times this year as the central bank fights historically high inflation, but this risks significantly denting economic demand, causing a recession.
Against this backdrop, “risk assets” like tech stocks and cryptos are faring particularly badly, hurt in part because bond yields keep rising. The yield on the benchmark 10-year U.S. Treasury note touched 3.1% on Friday, near the highest levels in four years. When yields climb, the math is tough for riskier assets: Higher yields reduce the extra return relative to bonds that traders expect to get from taking riskier bets.
Stocks were slipping even lower on Friday as a volatile week neared its end. But for cryptos, which trade 24 hours a day, seven days a week, there will be no respite come Saturday and Sunday. And market participants will be watching the digital asset space as stock markets take a breather over the weekend.
“If one wants to watch the direction of travel for market sentiment, the crypto-space this weekend might be interesting to watch, especially if we get some headline bombs,” said Halley.
More immediately, the U.S. jobs report for April is in focus.
Investors will be watching this labor market indicator for more signs of inflation. Expectations are for 400,000 jobs to have been added last month. But if the true number is much higher than that and wages also rise that could indicate that inflation may be prolonged, forcing the Fed to act more aggressively and likely prompting another negative reaction in the market.
Write to Jack Denton at jack.denton@dowjones.com
