Bitcoin Plunge Sends Crypto-Linked Stocks into Tailspin
NEW YORK: The US-listed shares of companies linked to the crypto market took a nosedive as bitcoin plummeted more than 15 percent on Monday. This dramatic drop came on the heels of weak economic data last week, causing concerns about a possible recession and triggering a frenzied sell-off of risky assets.
Optimism Turns to Pessimism
Just a short while ago, the crypto sector was basking in optimism following the approval of exchange-traded funds tied to the spot prices of bitcoin and ether, the two largest cryptocurrencies. Even a pro-crypto speech by Republican presidential candidate Donald Trump at a bitcoin conference added to the positive sentiment. However, the mood quickly soured as data revealed higher unemployment rates and weak manufacturing activity, leading to a sharp decline in risky assets.
Market Reaction and Analyst Insights
The sudden reaction from Bitcoin did not catch analysts off guard, with Bernstein analyst Gautam Chhugani noting that there were no significant negative developments for crypto. He expects the market to be influenced by macroeconomic factors and the upcoming election for the remainder of the quarter.
Stocks Take a Hit
Crypto mining companies like CleanSpark, Bitfarms, Riot Platforms, and Marathon Digital saw their shares drop between 12 percent and 25 percent in early trading. Meanwhile, Coinbase shares fell by 18 percent, and MicroStrategy, a prominent bitcoin buyer, experienced a nearly 23 percent decline.
Cryptocurrency Prices Plummet
Bitcoin hit its lowest point in nearly six months, while ether plunged by 19 percent, reaching levels not seen since January.
Investing Directly in Digital Assets
As the correlation between bitcoin and equities grows, some analysts believe that investing directly in digital assets is still preferable to using proxies like ETFs or crypto-related stocks. Joshua Peck, founder of crypto hedge fund TrueCode Capital, emphasized the importance of trading digital assets on native crypto exchanges for investors.