Bitcoin pummelled on back of slumping stock markets

The world's largest cryptocurrency drops to $33,266 in overnight trading, testing its January low of $32,951

Slumping equity markets continued to hurt cryptocurrencies such as Bitcoin. Reuters

Bitcoin fell to its lowest level since January on Monday as slumping equity markets continued to hurt cryptocurrencies, which are currently trading in line with riskier assets such as technology stocks.

The digital asset dropped to as low as $33,266 in morning trade, testing the January low of $32,951. A fall below that level would be it lowest since July last year.

At 9am UAE time on Monday, Bitcoin had pared back some of its overnight losses and was trading at $33,711.

“I think everything within crypto is still classed as a risk asset and, similar to what we have seen with the Nasdaq, most crypto currencies are getting pummelled,” said Matt Dibb, chief operating officer of Singapore-based cryptocurrency platform Stack Funds.

The technology-heavy Nasdaq fell by 1.5 per cent last week and has lost 22 per cent so far this year, hurt by the prospect of persistent inflation that has forced the US Federal Reserve to increase interest rates despite slowing growth.

Nasdaq futures were down a further 0.8 per cent in Asia trade on Monday morning.

Other factors adding to the decline over the weekend — Bitcoin closed on Friday around $36,000 — included the cryptocurrency market's notoriously low liquidity during weekends and also short-lived fears that algorithmic stablecoin Terra USD could lose its peg to the dollar, Mr Dibb said.

Stablecoins are digital tokens pegged to other traditional assets, often the US dollar.

Terra is closely watched by the cryptocurrency community both because of the novel way in which it maintains its 1:1 dollar peg and also because its founders have set out plans to build a reserve of $10 billion worth of Bitcoin to back the stablecoin.

This means volatility in the digital token could potentially spill over into Bitcoin markets.

Ether, the world's second-largest cryptocurrency, fell as low as $2,421 on Monday, its lowest level since late February.

Updated: May 09, 2022, 5:28 AM