Crypto owners in a world of pain

The price of bitcoin, ethereum and other cryptocurrencies continues to fall and is likely to get even worse. Here’s why.

Major cryptocurrencies bitcoin and ethereum crashed more than 10% overnight as a painful month for owners of the digital coin turned excruciating.

As of 5:40 a.m. AEST, the price of bitcoin had fallen to $43,886.51, down $4,417.70 in the past 24 hours and miles from the $63,154.29 mark it held on March 29.

It is down 50% from its November 2021 all-time high and the lowest for the most popular cryptocurrency since July last year.

The decline is mirrored by most other coins.

Ethereum was trading at $3264.43 at the same time, down from $311.55 in the past 24 hours. ETH was worth $4706.07 as recently as April 3.

But it could get worse.

Analytics firm Glassnode noted in a recent report that the decline “remains modest compared to the ultimate lows of previous Bitcoin bear markets” in 2015, 2018, and 2020, which capitulated to lows between -77 and -86%. compared to all time. high.

“As such, a further decline remains a risk and would be within the realm of historical cycle performance,” Glassnode said.

“Bitcoin remains highly correlated to broader economic conditions, suggesting that the road ahead may unfortunately be rocky, at least for now.”

This is because global stock markets also continue to crash.

China’s zero Covid policy is taking its toll

The Covid lockdowns in China added to nagging fears about the impact of rising US interest rates and soaring inflation to trip stocks.

Frankfurt, London and Paris all fell more than 2% overnight Monday, as did Tokyo. On Wall Street, the Dow was down nearly 2% late in the morning, with the tech-heavy Nasdaq continuing its steep decline with a 3.7% decline.

“The bloodshed in equity markets continued today as we start a new week… with the biggest declines seen in basic resources after the latest trade data from China showed that imports stopped in April,” said market analyst Michael Hewson at CMC Markets. UK.

Millions of people in Beijing stayed home on Monday as the Chinese capital tries to fend off a Covid-19 outbreak with creeping movement restrictions.

People in Beijing fear they will soon find themselves in the grip of the same draconian measures that have trapped most of Shanghai’s 25 million people at home for weeks.

Shutdowns in dozens of Chinese cities – from manufacturing hubs in Shenzhen and Shanghai to the breadbasket of Jilin – have wreaked havoc on supply chains in recent months and further stoked global inflationary pressures.

Investors received more bad news on Monday as China’s April exports fell to their lowest level in nearly two years, due to the country’s strict zero-Covid policy.

Exports plunged to 3.9% year-on-year, while imports stagnated in April. The data also showed the shutdowns had already hit oil demand in China, driving oil prices down 5%.

“Oil is also offside as China confirmed that its oil imports in the first four months of the year fell 4.8%,” said David Madden of Equiti Capital.

US inflation and the Russian war also have an impact

Stock markets – including the ASX – had plunged last week after the US Federal Reserve hiked interest rates by half a percentage point and announced further hikes to tackle high inflation since decades.

“Anxiety stems from the Fed’s next moves, with creeping uncertainty about the scale and speed of interest rate hikes,” said Hargreaves Lansdown analyst Sophie Lund-Yates.

Analysts at brokerage Charles Schwab said “Elevated inflationary pressures continue to cloud beliefs as the Fed and other central banks begin to tighten monetary policy.

Global markets have also suffered this year from Russia’s invasion of Ukraine.

“Meanwhile, inflation concerns continue to be heightened by the war in Ukraine and ongoing supply chain challenges,” they added.

President Vladimir Putin on Monday defended Russia’s offensive in Ukraine and blamed Kyiv and the West, as he sought to use major Victory Day celebrations to rally patriotic support for the campaign.

However, investors were relieved that Putin made no major announcements, despite reports that he could use the anniversary to signal an escalation of the conflict or a general mobilization.

“Putin didn’t declare war on Ukraine to allow full mobilization, which is obviously a relief,” noted Markets.com analyst Neil Wilson.

— with AFP

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