Bitcoin Retreats 20% From Record, Joining Risk-Asset Sell-Off
New York (Nov 26) Bitcoin tumbled 20% from the record high it notched earlier this month as a potentially worrisome new variant of the coronavirus spurred traders to dump risk assets across the globe.
The world’s largest cryptocurrency fell as much as 9% to $53,552 on Friday. Ether, the second-largest digital currency, dropped more than 12%, while the wider Bloomberg Galaxy Crypto Index declined as much as 7.7%.
A new variant identified in southern Africa spurred liquidations across global markets, with European stocks falling the most since July and U.S. equity benchmarks also trading lower. Bitcoin wasn’t spared from the carnage despite increasingly being seen by many crypto enthusiasts as a hedge against financial-market turmoil. And even as Bitcoin has gained more mainstream acceptance, the cryptocurrency is still prone to wild swings.
“To us, it is still by and large a risk asset,” said Ross Mayfield, investment strategy analyst at Baird. “When things get kind of scary, there are going to be sellers.”
Meanwhile, gold -- a traditional safe-haven asset -- climbed as much as 1.5% Friday morning, though the precious metal has still significantly underperformed Bitcoin year to date.
“I think the role that Bitcoin will eventually play is still uncertain. The role that something like gold and Treasuries play is pretty well known at this point. So the conclusion is that when things really look ugly, the traditional safe havens will rise to the top,” Mayfield added.
The variant news that roiled markets wasn’t the only negative factor weighing on Bitcoin. Coming into this week, analysts cited a number of crypto obstacles including U.S. tax-reporting requirements for digital currencies, China’s intensifying regulatory clampdown, and India’s sights on a new bill that could ban most private cryptocurrencies.
Bloomberg
