Investors unnerved by the financial tensions of a Chinese real estate company sent cryptocurrencies on a rampage on Monday, with bitcoin (BTC-USD) falling more than 7%.
As risk-sensitive assets plummeted, the leading digital coin lost more than $3,000 and changed hands just below $44,000 during afternoon trading. The moves were the latest signal that the world’s largest cryptocurrency has not reached the “safe haven” asset status that some of its more ardent proponents have promoted, even as debt levels around the world rise in response to COVID-19.
With the virus still dominating investor concerns, the markets were shaken by news of Evergrande, a major Chinese real estate company on the brink of bankruptcy. China’s potentially slowing economy and Beijing’s aggressive actions against key business sectors have come together with concerns about the global economy. Meanwhile, a fight is raging in Washington over raising the US debt limit.
The spillovers were evident across the crypto world. According to CoinmarketCap, top payment networks such as Ethereum (ETH-USD), Cardano (ADA-USD), Binance Coin (BNB-USD) and Solana (SOL1-USD) have all suffered even bigger losses than bitcoin in the past 24 hours: they were all up. off the day by at least 8%.
According to the blockchain analytics platform glass node, the 7-day moving average for the number of Bitcoin wallet addresses sending money to crypto exchanges has reached a 3-month high, signaling an intensification of selling pressure and speculative trading.
Considering the costs associated with moving crypto to and from most centralized crypto exchanges, this rising flow volume to exchanges is an indicator that BTC holders could sell. Meanwhile, the total balance of crypto on exchanges continues to fall this week.
While the value of BTC is often described as digital gold, which behaves like a store of value that does not correlate with the stock market, the drop in price over the past 24 hours shows signs that today’s Bitcoin price is responding to investors’ risk tolerance.
Nik Bhatia, a crypto watcher and author of the macroeconomics-focused cryptocurrency book, “Layered Money,” highlighted bitcoin’s close ties to risky assets in his newsletter last Friday, saying the digital currency “has been fighting a story of correlation between the stock market.”
Referring to its correlation with the pandemic-driven stock market crash in March 2020, Bhatia said that “bitcoin is responding to the global macro environment and is itself a product of it.”
Pete Humiston, a manager who works on the market intelligence side of the crypto exchange, Kraken, said Bitcoin is “an emerging store of value” that is much more volatile than stocks. “However, it tends to be highly correlated with stocks from time to time.”
In fact, since its peak of nearly $53,000 in September after El Salvador officially introduced bitcoin as legal tender, the crypto unit has been removed more than $8,000.
David Hollerith covers cryptocurrency for Yahoo Finance. follow him @dshollers.
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