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Bitcoin’s tumble is piquing the interest of investors who view pronounced swings in the digital token as a possible precursor for broader changes in risk appetite in global markets.
The cryptocurrency has shed about 4 percent in the past two days following a near 16 percent plunge in April, the worst monthly drop since Sam Bankman-Fried’s FTX digital-asset empire imploded in November 2022. The token changed hands at US$57 359 as of 11:17 a.m. Thursday in Singapore, around a two-month low.
Some investors scour Bitcoin inflexions for clues about shifting liquidity dynamics that can buffet other assets. The token slid in the past few weeks as the Federal Reserve signaled interest rates will stay higher for longer, a mantra that tightened financial conditions by boosting Treasury yields and the dollar.
“Bitcoin is our favourite canary,” ByteTree Asset Management Chief Investment Officer Charlie Morris wrote in a note. “It is warning of trouble ahead in financial markets, but we can be confident it’ll bounce back at some point.”
“The recent strength in the US dollar may signal market tightness ahead,” Morris added.
The largest digital asset hit a record high of almost US$74 000 in mid-March, buoyed by a flood of inflows into debut US spot-Bitcoin exchange-traded funds from the likes of BlackRock and Fidelity Investments. The demand for the products subsequently fizzled, and markets failed to get a tailwind from this week’s launch of spot-Bitcoin and Ether ETFs in Hong Kong. Discounts to net asset value for some of the US portfolios have widened to record levels, underscoring the challenges that can stem from Bitcoin volatility. – Bloomberg
Bongani Ndlovu
Online Reporter