Pre-market trading for U.S. stocks tied to cryptocurrencies has seen a steep decrease ahead of the opening bell, reflecting the dramatic decline in the larger crypto market.
The sell-off has sent shockwaves through the ecosystem of digital assets and was brought on by a confluence of factors such as regulatory concerns, macroeconomic uncertainties, and geopolitical tensions.
According to statistics from MarketWatch, one of the biggest cryptocurrency exchanges, Coinbase Global Inc. (COIN), witnessed a 19% decline in stock price, while MicroStrategy (MSTR), which led the pack in pre-market losses, saw a 29% decline.
For Bitcoin miners that are publicly traded, things weren’t all that better. Riot Platforms (RIOT) and Marathon Digital (MARA) reported decreases of 13.5% and 18%, respectively. Hut 8 (HUT) and Iris Energy (IREN), two of the smaller, publicly traded Bitcoin miners, were also feeling the pressure. In pre-market trading, their share prices have dropped by 27% and 19.3%, respectively.
The sharp decrease in cryptocurrency stocks is closely related to the state of the crypto markets, which were all sparked by a surge in panic about a potential worldwide recession.
The global sell-off that is impacting stock markets across the globe includes the decline in the cryptocurrency sector.
Asian markets were particularly badly affected; Japan’s Nikkei 225 index fell more than 12.4%, marking its worst day since 1987.
Significant losses were also seen by other major Asian indices, such as Taiwan’s Taiex and South Korea’s KOSPI.
The FTSE 100 and STOXX Europe 600 also opened lower, reflecting the general investor nervousness, as the ripple effect expanded to European markets.
The leading cryptocurrency, Bitcoin (BTC), is now down 15.5% in the last 24 hours and a frightening 28% in the last week, with a trade value of $51,450.
The second-largest cryptocurrency by market capitalization, Ethereum (ETH), has performed even worse, falling 33.4% during the previous week and 22.4% in the last day.
Experts in the field identify a number of causes for this market-wide sell-off.
The CEO of Fideum, Anastasija Plotnikova, told Decrypt that the current dip in cryptocurrency stocks is a result of both industry-specific difficulties and general market uncertainty.
“A number of factors, such as recent regulatory scrutiny, macroeconomic worries like geopolitical instability and distracted attention, and an overall risk-off sentiment among investors, can be attributed to this decline,” the spokesperson stated. “Because of its volatility, the cryptocurrency market is especially vulnerable to shifts in investor sentiment and changes in regulations.”
She went on to say that the general state of the stock market, which includes worries about interest rates, inflation, and the expansion of the world economy, might be a factor in the decline in stocks linked to cryptocurrencies.
It is common for investors to use these equities as a gauge for attitude toward the larger cryptocurrency and blockchain tech sectors, so they are carefully watching these stocks for indications of stabilization or further deterioration, the analyst added.
It seems that prominent participants like Jump Trading and Paradigm VC’s aggressive Ethereum sales were the direct cause of the recent decline in the cryptocurrency market.
When Ethereum volatility sharply increased, market makers hurried to shorten gamma, which made this move worse.
A bad set of U.S. unemployment figures issued last Friday has further impacted macro mood, adding to the perfect storm of unfavorable variables.
The Chicago Board Options Exchange’s CBOE Volatility Index, or VIX, reached 50, a number that has only been attained twice in history—during the COVID-19 epidemic and the 2008 financial crisis.
It seems that prominent participants like Jump Trading and Paradigm VC’s aggressive Ethereum sales were the direct cause of the recent decline in the cryptocurrency market.
When Ethereum volatility sharply increased, market makers hurried to shorten gamma, which made this move worse.
A bad set of U.S. unemployment figures issued last Friday has further impacted macro mood, adding to the perfect storm of unfavorable variables.
The Chicago Board Options Exchange’s CBOE Volatility Index, or VIX, reached 50, a number that has only been attained twice in history—during the COVID-19 epidemic and the 2008 financial crisis.
The cryptocurrency market is probably going to see more unwinds as a result of this rise in volatility across a number of asset classes.According to Philipp Zentner, CEO of LI.FI, who spoke with Decrypt, two major factors driving this decline are the unwinding of the Yen carry trade, which is generating a risk-off mentality, and expected sell-offs in cryptocurrency ETFs, which are motivated by worries of a gap down when the US market opens.
He added that risky assets, such as Ethereum prices, have been severely impacted by the Bank of Japan’s 25 basis point interest rate hike.
The relationship between the Yen carry trade and the interest rate hike by the BOJ is significant. In order to invest in higher-yielding assets elsewhere, one can borrow Yen at low interest rates through the Yen carry trade, according to Zentner. Investors are compelled to liquidate their holdings in order to pay off debts denominated in yen as a result of the rate hike’s strengthening of the yen and the increased cost of keeping these loans. Significant price declines are caused by this selling pressure, which impacts a number of asset types, including cryptocurrencies.”
The general attitude of being risk-averse has also been influenced by geopolitical conflicts.
Now that Israel has killed a senior of Hamas, and Iran has vowed to retaliate, tensions have increased as the United States starts sending soldiers to the Middle East.