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Cryptocurrencies experienced a downturn following a significant drop in technology stocks, which led the S&P 500 and Nasdaq Composite to their worst day since 2022. Bitcoin fell 2% to $64,603.34, while ether slid 6% to $3,172.59.
The drop in tech stocks, triggered by disappointing quarterly earnings reports from Alphabet and Tesla, contributed to a broader market sell-off, affecting high-risk assets like cryptocurrencies. Market strategist Joel Kruger from LMAX Group noted that these setbacks reflect broader macroeconomic concerns, including weaker economic data, disappointing US earnings, and ineffective central bank policies. This environment has driven investors towards traditional safe havens.
Additionally, the ongoing Mt. Gox repayment schedule has exerted persistent selling pressure on Bitcoin this month. The recent introduction of ether exchange-traded funds (ETFs), including the Grayscale Ethereum Trust (ETHE), has also contributed to the decline. The trust experienced $484 million in outflows, likely due to traders engaging in arbitrage between the trust and spot ETH.
Yuya Hasegawa, a crypto market analyst at Bitbank, compared the current situation to the initial decline of bitcoin following the launch of its ETFs in January. He suggested that while ether ETFs are facing initial challenges, upcoming events, such as the Bitcoin 2024 conference and potential Federal Reserve rate cuts, might offer a positive outlook for cryptocurrencies.
Despite recent declines, Bitcoin and ether are up 51% and 38% year-to-date, respectively, contrasting with the S&P 500’s 14% gain over the same period. Crypto-related stocks also retreated, with Coinbase down 3%, MicroStrategy down 2%, Iris Energy down 5%, and Riot Platforms down 3%. Kruger described the recent crypto setbacks as a “minor blip” in an otherwise strong uptrend.