On Monday, two asset classes that faced severe punishment were cryptocurrencies and tech stocks. In many respects, cryptocurrencies and related assets experienced a harsher decline, with numerous investments plunging sharply in value throughout the day.
Crypto Mining Stocks Plunge
Although the extent of losses varied, crypto mining stocks generally ended the trading session in negative territory. Cleanspark (NASDAQ: CLSK) was among the hardest hit, recording a decline of nearly 10% in its share price by market close. Cipher Mining (NASDAQ: CIFR) also saw significant losses, finishing the day with nearly a 7% drop. In contrast, Marathon Digital Holdings (NASDAQ: MARA) fared slightly better, with a loss of only 1.4%.
The relationship between crypto miners and the performance of the assets they mine means that if cryptocurrencies suffer, these companies will feel the impact as well. Investors actively sold off a wide range of cryptocurrencies on Monday, with the perennial leader Bitcoin down by over 7% in early evening trading.
Bitcoin Price Drop Drives Market Decline
The immediate catalyst for the widespread sell-off mirrored sentiments seen in tech stocks and the broader equity market. This downturn followed the Bank of Japan’s decision to raise its key interest rate last Wednesday. Even though the increase was minimal—adjusting to approximately 0.25% from a range of 0% to 0.1%—it had a noteworthy effect on the yen. The anticipated aftermath of this rate hike was a sharp pullback in the crypto market, driven in part by the yen carry trade.
In addition, a prolonged pullback in the cryptocurrency market has been impacting sentiment. Earlier in the year, many investors were eager to dive into this asset class, especially after excitement surrounding the new spot Bitcoin exchange-traded funds (ETFs) that revitalized interest in the top cryptocurrency. However, enthusiasm waned after the Bitcoin halving in April, resulting in a decline that has yet to recover fully.
Recovery Potential Amidst Market Uncertainty
Currently, Bitcoin trades just below $55,000. This price represents a significant drop from levels exceeding $70,000 that it experienced around the time of the halving. Consequently, both Bitcoin and related assets such as crypto miners may be poised for a rebound in the near future. As the effects of the yen carry trade fade, investors expect swift adjustments in their holdings of coins and tokens. Furthermore, there is growing optimism that the Federal Reserve might soon cut its key interest rate.
The downturn on Monday was particularly stark, as Bitcoin and U.S. cryptocurrency-related shares dropped in tandem with the broader stock market following a disappointing jobs report. The Fed’s decision to maintain current interest rates heightened fears of a potential U.S. recession. Over the previous five days, Bitcoin’s price plummeted over 15%, falling below $55,000 and reaching its lowest point in nearly six months. Ether also suffered a significant blow, dropping more than 22% to $2,463, its lowest since January.
Coinbase and MicroStrategy Stocks Tumble as Crypto Market Faces Recession Fears
Crypto miners also had their fair share of struggles too. Companies like CleanSpark, Bitfarms, Riot Platforms, and Marathon Digital all lost between 12% and 25% of their value in early trading. While the shares recovered some ground during the trading session they were still down for the day. The slump stretched to exchanges; Coinbase recorded a drop in its stock by as much as 18% and MicroStrategy’s falling by as much as 23%.
The fluctuations in the crypto industry were remarkable given the previous expectations of better regulation of the industry. However, this changed as early signs of a recession started affecting investors, resulting in a sharp decline in both cryptocurrencies and their affiliated stocks. This left the industry struggling with confusion as it tried to come to terms with the changes that were brought by these innovations. Stay tuned for more updates on this evolving story on the Turkish NY Radio.
