World markets sell off, causing Bitcoin to hit new two-month low

In this captivating illustration captured on June 16, 2023, a symbolic representation of the renowned cryptocurrency Bitcoin is positioned on a PC motherboard, demonstrating its integration with modern technology.

On Friday, Bitcoin, the leading cryptocurrency, experienced a significant decline, reaching a fresh two-month low. This drop occurred as global markets succumbed to risk aversion, permeating sentiments across various sectors. Bitcoin witnessed a 7.2% decrease on Thursday, marking its most substantial single-day decline since November 2022, coinciding with the collapse of the prominent exchange FTX.

During Asian trading hours on Friday, Bitcoin descended to its lowest point since June 16, reaching $26,172, reflecting the adverse market conditions. As of 0835 GMT, Bitcoin made a partial recovery, reaching $26,441, experiencing a modest 0.8% decline for the day.

The entire global market has been grappling with a selling spree, leading to the decline of Wall Street’s principal indices on Thursday. Additionally, Asian shares faced their third consecutive week of losses due to concerns regarding China’s economy and the expectation of higher US interest rates, influenced by the nation’s resilient economic performance.

Ether, the second most prominent cryptocurrency, remained stable at $1,685.20, despite its notable decrease on Thursday alongside Bitcoin.

Multiple analysts attribute the decline in crypto assets to a recent report by the Wall Street Journal, revealing that Elon Musk’s SpaceX sold its Bitcoin holdings after reducing its value by $373 million. Musk, known for his impact on the crypto community, has previously caused significant price movements in Bitcoin through his tweets.

While the SpaceX report acted as the immediate catalyst for Bitcoin’s sell-off, Ben Laidler, global markets strategist at eToro, emphasizes that the broader driver is the prevailing risk-off sentiment influencing all asset classes. This indicates that crypto assets are not impervious to the ongoing market pressures.

Joseph Edwards, head of research at Enigma Securities, identifies two contributing factors to Bitcoin’s price movement: low volatility and a lack of enthusiasm from retail investors. These factors have contributed to Bitcoin’s stagnation near the $30,000 mark in recent months, following its substantial decline in 2022 due to the collapse of several crypto companies, resulting in substantial losses for investors.

The crypto markets received a boost in June when BlackRock filed an application to launch a spot Bitcoin exchange-traded fund (ETF) in the United States. Some investors interpreted this move as a positive indication that the U.S. Securities and Exchange Commission would grant approval for spot Bitcoin ETF applications from various asset managers, including Grayscale.

The prevailing concern in the market currently revolves around whether this decline is anticipatory, awaiting the outcome of Grayscale’s lawsuit against the SEC. Positive expectations regarding the lawsuit have maintained inflated market conditions throughout the summer months.

In conclusion, Bitcoin’s recent decline reflects the broader risk-off sentiment across global markets spurred by various factors, including the SpaceX report and general market conditions. Nevertheless, the outcome of pending legal actions and the stability of the global economy will likely continue to influence the trajectory of cryptocurrency markets.

Reporting by Elizabeth Howcroft, with edits by Dhara Ranasinghe and Elaine Hardcastle.

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