Bitcoin gets swept up in global sell-off as stocks stumble.
Cryptocurrency prices slumped Monday as a broad sell-off sparked by worries about contagion from China Evergrande Group swept through global markets.
The price of Bitcoin fell nearly 8 percent to $43,717, according to Coindesk. It had dropped as much as 10.7 percent earlier, which pushed it below $43,000 and to its lowest level since the beginning of August. Other digital assets also retreated, with Bitcoin Cash, EOS and Ether declining.
The losses mirrored the action in the broader market as investors
the risks from Evergrande’s debt woes and this week’s Federal Reserve meeting. The S&P 500 fell about 2.5 percent at one point in its worst session since January, while European equities tumbled the most in more than two months.
“Some have attributed the sudden dip to the currently ongoing Evergrande situation in China, which has already caused turmoil in traditional markets,” wrote Jonas Luethy, a sales trader at GlobalBlock, a U.K.-based digital asset broker. “Analysts have suggested a choppy week is ahead, with a potential pullback to as low as $41,000.”
The swiftness of the plunge was likely accelerated as more than 258,000 traders had their accounts liquidated over the past 24 hours, equal to around $1.27 billion worth of cryptocurrency, according to data from Bybt, a crypto futures trading and information platform.
“This is part of a well-established pattern where it sells off as traders cash in their riskier assets to cover margin calls and/or sit on the sidelines until markets calm down and they feel more comfortable going back into riskier positions,” said Leah Wald, CEO at Valweighed kyrie Investments.
Chartists say Bitcoin could test its 100-day moving average, which currently sits around $40,655. Should it fall to that level, it could find support at $40,000. Still, other signals show it could be in for a reprieve: The coin fell below the lower limit on the Trading Envelope indicator, suggesting it dropped too far, too fast. And its 14day Relative Strength Index of 39 shows it’s creeping toward oversold levels.
Although Bitcoin doesn’t always trade in tandem with financial markets, its correlation on a 30day basis to futures on the Nasdaq 100 has been consistently positive since February last year. A reading of 0.5, which it’s close to now, means they’re moving in the same direction quite often these days.
Investors say that while a link with tech stocks make sense — both types of investments may be thought of as appealing to the same tech-savvy investor pool — strong correlations are also showing up for small cap stocks and the S&P 500. That’s probably because as Bitcoin becomes more integrated in global financial markets, it should respond more to the changes in risk appetite that drive global sentiment.