Bitcoin plummets 11% in biggest intraday drop since January

The largest digital currency has been unable to rise above its highs from the start of the year amid global economic concerns and rising interest rates

An advertisement for Bitcoin in Hong Kong. The world's biggest digital currency suffered its biggest intraday drop since January. AP
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Bitcoin tumbled the most since January as the rout in financial markets deepened amid increasing concerns of recession.

The largest digital currency fell as much as 11 per cent to $35,611, the biggest intraday drop since January 21.

It had gained 5.3 per cent on Wednesday. Ether slumped as much as 8.7 per cent. Avalanche and Solana, among some of the largest gainers after the US Federal Reserve raised rates on Wednesday, were down as much as 15 per cent and 11 per cent, respectively.

At 8.30am UAE time on Friday, Bitcoin had pared back some of its losses but was down 8.49 per cent at $36,329.50.

“Investors are jittery about the Fed continuing to raise interest rates after yesterday’s 50 basis points hike,” said Jason Lau, chief operating officer of the San Francisco-based Okcoin exchange. “The potential of additional rate hikes makes the trajectory of the global economy uncertain.”

The US central bank’s policy-making Federal Open Market Committee on Wednesday voted unanimously to increase the benchmark rate by a half percentage point and said it will begin allowing its holdings of Treasuries and mortgage-backed securities to roll off in June. Risky assets surged after Fed chairman Jerome Powell said a 75-basis point increase is “not something that the committee is actively considering”.

Still, in this higher-rate environment, Bitcoin hasn’t been able to break out in any meaningful way beyond its highs at the start of the year. The coin has largely traded within a tight range over the past few months.

“Bitcoin has become increasingly correlated with US trading hours and US traditional market indices, likely due to a combination of increasing US institutional presence as well as the absence of China after the sweeping bans last year,” said Josh Olszewicz, head of research at digital asset fund manager Valkyrie Investments.

Money has been flowing out of the sector amid the malaise. Investors yanked roughly $120 million from crypto products last week, bringing total outflows over the past four weeks to $339m, according to data tracked by fund provider CoinShares.

Bitcoin last week accounted for the majority of the flows in what was its largest single week of outflows since June 2021.

“Since March this year, most of the large sell-offs in Bitcoin have kicked off during US market open, potentially suggesting a market participant continues to sell every bullish rally,” Mr Olszewicz said.

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Updated: May 06, 2022, 5:08 AM
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