474
views

Bitcoin Drops To $38,000 – More Pain Ahead?

Crypto markets collapsed after a global sell-off in risk assets and as Russia’s proposed a ban on all cryptos.

Bitcoin fell 9% to $38,500, breaking key support at $40,000, as global markets saw a 1% decline.

Other major cryptos fell as well. Ethereum dropped by almost 12% to $2,793. Binance’s native coin BNB dropped 10%. Smart contract blockchain Cardano lost 13%, dropping to $1.19, while Solana dropped by 15%, to $117.

Almost all the major cryptos were in the red, dropping as much as 15%. The total crypto market cap dropped by almost 10%, to $1.79 trillion. Markets saw some $200 billion in crypto value lost in the last 24 hours.

Crypto collapse comes as investors dumped tech stocks, which fall into the category of risk assets.

The selling only accelerated after tech company Netflix warned about dropping subscriber numbers. The streaming company led the tech drop, falling by almost 20%.

This caused a broader drop in the markets, as investors worried that the Fed’s removal of stimulus would collapse stocks. Tighter monetary policy is especially a problem for risk assets, like tech stocks and crypto.

News from Russia also contributed to the crypto selloff. Russia’s central bank proposed a ban on mining and the use of cryptos in the country. Russia cited threats to financial stability, security of investors and monetary sovereignty.

The country has banned all public officials from holding crypto back in January 2021. Earlier, authorities argued that criminals and terrorists could use crypto for illegal means.

Russia is the third-largest country by BTC hash rate, after the U.S. and Kazakhstan. This comes after a European regulator proposed a ban on all crypto mining in the EU.

Crypto And Interest Rates

Crypto assets are now seeing an outflow of investors that used cheap money to invest in speculative crypto projects. Now that they expect interest rates to go up, most are leaving the space. This, in turn, is weighing on the prices.

This is causing concern that cryptos are now too much tied together with stocks. The 90-day correlation between the S&P 500 and Bitcoin rose to the highest level since October 2020.

In particular, it could be that crypto relies too much on cheap money from the Fed. Cheap money might have fuelled speculation in the crypto space.

In fact, a Bloomberg analyst warned that anyone holding crypto right now is betting against the Fed. Mike McGlone said on Tuesday that fighting the Fed is not a good idea.

The number one theme I’ve been using for months now is do not fight the Fed. If you’re long risk assets, you are fighting the Fed, and cryptos are the riskiest assets.

Most investors agree that the Fed is not bluffing on rate hikes. In fact, Wall Street is pricing in 5 rate hikes this year.

With rising rates, there won’t be that much cheap money for investors to dump into stocks or crypto.

Moreover, rising interest rates may help curb inflation. That would remove another reason why some people hold crypto – as an inflation hedge.

Gold And Crypto Investors Not Buying It

However, not everyone agrees. Gold and crypto investors have not always seen eye to eye. Still, they agree on one thing – inflation will continue to be a problem. Both gold and crypto investors believe that the economy is far from being in recovery territory.

Gold investor (and notorious crypto critic) Peter Schiff points out that the economy is not as strong as most claim.

Paper profits are disappearing fast. #Peloton is down over 85% from last year’s high. How many people who had huge paper gains in $PTON are still ahead? #Netflix is tanking after hours. It’s now 35% below its record high set just two months ago. This can get very ugly, very fast!

For example, the index of Consumer Sentiment dropped 2.5% to 68.8, worse than expected. That’s the second-worst reading in ten years. What’s even worse is that the worst reading in 10 years was just two months ago.

In his view, if the Fed cuts rates now, they might trigger a recession. That’s something that they don’t want to do. Rather, he thinks that, if push comes to shove, the Fed will keep rates low.

Crypto investor and Nexo co-founder Antoni Trenchev agrees with that statement. In a recent interview, he said that the Fed has no political will to cut rates.

I think that as soon as we see an interest rate hike, we will see a dip into the equities and the bond market. Quite frankly, in the last few years, we haven’t seen much political will to power through any sort of correction in the traditional markets.

Bitcoin live price
Btc
Bitcoin
$30.040
price
2.38153%
price change
BUY NOW

Whether or not gold and crypto investors are right, it is unlikely that markets will vindicate them that quickly. That is, not until the Fed either goes forward or starts delaying rate hikes this year.

Stay up to date with our latest articles

More posts

New MicroStrategy CFO Remains Committed to Bitcoin HODL Plan

MicroStrategy still doesn’t plan to sell its Bitcoin, according to the company’s new Chief Financial Officer Andrew Kang. The recent bear market, which has brought Bitcoin’s value below the company’s average purchase price, hasn’t shaken the organization’s faith. “At this time, we do not have any intention to sell,” said the CFO, after joining the company on May 9th hailing from GreenSky. “There are no scenarios that I’m aware [in which] we would sell.” Shareholders also remain confident and reportedly…

CFTC Chief Backs Regulatory Incentives to Make Bitcoin Proof of Stake

Rostin Behnam – chairman of the Commodities and Futures Trading Commission – is not happy with Bitcoin’s current levels of energy consumption. He believes regulators should establish incentives to push the network towards a proof of stake (POS) consensus model. Not Worth the Energy, says Benham Speaking at POLITICO’s Sustainability Summit, Benham claimed that Bitcoin’s energy consumption doesn’t match its economic output. “That may rebalance over time, but right now it’s clearly skewed,” he said. Most of Bitcoin’s energy consumption…

Bitcoin Fear and Greed Index Hits Lowest Level Since Covid Crash

The Bitcoin/ Crypto Fear and Greed Index today shows the most bearish crypto market sentiment since March 2020. The index started showing “extreme fear” across the market last week. Bitcoin collapsed below $30,000 for the first time since July, while the UST stablecoin fell apart. Today, the index reflects a single-digit score of only 8. That’s the lowest number since March 28th, 2020, when it collapsed to the same level due to covid lockdown fears. By contrast, March 28th, 2022…

China Rebounds as the Second-Largest Crypto Mining Nation

Nearly a year since the Chinese government initiated a nationwide crackdown on BTC mining, the nation is again a thriving center for mining operations. Albeit this time, secretly. The Cambridge Digital Assets Program (CDAP) provided this information in their latest research.  China Hosts One-Fifth of the Global BTC Hash Rate The CDAP revealed that underground miners within China are responsible for about 21% of the total Bitcoin hash rate globally. Before the ban, the East Asian nation had been the…

Elwood secures investments from Goldman Sachs and Barclays

American multinational investment bank Goldman Sachs and British bank Barclays have invested in crypto trading platform Elwood Technologies. Elwood Technologies unveiled this news earlier today through a press release. The banks joined other renowned investors to raise $70 million in the company’s Series A funding round. According to the press release, Goldman Sachs co-led the funding round alongside Dawn Capital. The list of investors in the funding round featured both traditional financial institutions and digital asset companies. These include BlockFi…

Bill Miller Says he Hasn’t Sold his Bitcoin, Despite Bear Market

Legendary value investor Bill Miller has HODL’d through Bitcoin’s recent crash despite it reaching price lows unseen since December of 2020. The investor maintains that Bitcoin is fundamentally different from all other cryptocurrencies and that it lacks true competition. Bitcoin Above All for Bill Miller In an interview with CNBC on Thursday, Miller said that Bitcoin has correlated with different multiple metrics throughout the years. He currently sees it correlated with “risk-on, risk-off”, an investment setting when price behavior swings…

El Salvador buys the dip; Adds 500 BTC to its coffers

El Salvador, the only country that accepts Bitcoin (BTC) as legal tender, has added 500 BTC to its balance sheet. Nayib Bukele, the country’s president, announced this bullish news through a tweet yesterday. According to Bukele, El Salvador bought the dip after the flagship cryptocurrency plunged to the $30,000 level. Bukele’s tweet read, El Salvador just bought the dip! 🇸🇻 500 coins at an average USD price of ~$30,744 🥳 While El Salvador bought BTC at an aggregate price of…

Senator Warren Questions Fidelity Over Plans to Include Bitcoin in Retirement Accounts

Last month, Fidelity announced that it would begin allowing customers to include Bitcoin in their 401(k) retirement accounts. However, as with most things crypto-related, US Senator Elizabeth Warren is highly skeptical of the idea. Questioning Fidelity The senator issued a letter to Fidelity CEO Abigail Johnson on Wednesday, questioning the “appropriateness” of her company’s decision. Warren claimed that cryptocurrencies pose risks of “fraud, theft and loss,” citing the Department of Labor’s warning to 401(k) fiduciaries. The labor department’s warning was…

Joe Rogan Compares Bitcoin to the Early Internet, Says Government is “Freaking Out”

The popular MMA commentator and podcaster Joe Rogan recently discussed Bitcoin with light-heavyweight UFC fighter Khalil Rountree. The men highlighted the financial freedom that the network can provide, and the fearful reaction its received from many governments today. Bitcoin as a Life Raft During JRE MMA show #124, Rountree recounted his experience attending the Bitcoin 2022 conference in Miami last month. Other top-tier UFC fighters were attending the conference as well, including Ben Askren and Francis Ngannou. “I haven’t been…

Warren Buffett Would Choose $25 Over Every Last Bitcoin

Despite his company’s curious investment decision in February, Warren Buffett remains an absolute disbeliever in Bitcoin. On Saturday, the billionaire investor made clear that he wouldn’t even sacrifice $25 to have all of the Bitcoin in the world. Bitcoin Still Worthless, Says Buffett Warren Buffett made his comments during the Berkshire Hathaway annual shareholder meeting in Omaha, Nebraska. Berkshire shocked crypto investors earlier this year when it put $1 billion into Nubank – a crypto-friendly Brazilian banking organization. This led…