U.S.-listed shares of companies linked to cryptocurrencies experienced significant declines as bitcoin dropped by over 15% on Monday. This downturn followed last week's release of weak economic data, which sparked concerns about a potential recession and led to a surge in the sale of high-risk assets. This sharp decline represents a dramatic shift for the sector, which had been buoyed by recent optimism due to the approval of exchange-traded funds (ETFs) linked to the spot prices of bitcoin and ether, the two largest cryptocurrencies. Additionally, Republican presidential candidate Donald Trump's supportive speech on cryptocurrencies at a recent bitcoin conference had further boosted market sentiment. However, recent data indicating higher unemployment rates and weak manufacturing activity has put pressure on risky assets.
"We are not surprised by Bitcoin's sudden reaction as it is the only market traded over the weekend. We do not see any additional negative factors for cryptocurrencies here," stated Bernstein analyst Gautam Chhugani in a recent note. "The bitcoin and crypto market is likely to be influenced by macroeconomic factors and election developments for the majority of the third quarter." Shares of crypto mining companies such as CleanSpark, Bitfarms, Riot Platforms, and Marathon Digital fell between 12% and 25% in early trading. Coinbase shares dropped by 18%, while bitcoin investor MicroStrategy saw a nearly 23% decline. Bitcoin reached its lowest point in almost six months, with ether falling by 19% to levels not seen since January.
The growing correlation with equities has diminished bitcoin's status as a safe-haven asset, but some analysts argue that direct investment is still preferable to exposure through proxies like ETFs and crypto-related stocks. "If this weekend serves as any reminder, it is the importance of investing directly in digital assets on native crypto exchanges," commented Joshua Peck, founder of crypto hedge fund TrueCode Capital. "While others were waiting for the futures market to open on Sunday night, we were executing our strategy without interruption," he added. However, other experts advise caution, noting that bitcoin and cryptocurrencies are high-risk assets and are positioned at the extreme end of the risk spectrum, according to market analyst Tony Sycamore at IG.
