SAN ANSELMO, CALIFORNIA – JUNE 6: In this photo illustration, the Coinbase logo is displayed on a screen on June 6, 2023 in San Anselmo, California. The Securities and Exchange Commission has filed a lawsuit against cryptocurrency exchange Coinbase for allegedly violating securities laws by acting as an exchange, broker, and clearinghouse without registering with the Securities and Exchange Commission. (Photo Illustration by Justin Sullivan/Getty Images)
Justin Sullivan |
Cryptocurrency exchange Coinbase has just had its worst week of the year. Bitcoin miners Marathon Digital fell 20%. A basket of crypto-related stocks tracked by Schwab fell to its lowest level since February.
The industry-wide sell-off reflected growing concerns about the health of the U.S. economy and followed a general decline in prices for Bitcoin, ether and risky assets in general. The tech-heavy Nasdaq lost 5.8% for the week, its worst performance since January 2022.
In addition to macroeconomic pressures, the calendar is not doing cryptocurrencies any favors. According to CoinGlass, September is historically a difficult trading month for crypto assets, with Bitcoin recording an average loss of 4.8%. The Crypto Fear & Greed Index, an indicator of crypto market sentiment, is firmly in the “Extreme Fear” zone, suggesting that investors are concerned about price movements.
The Bitcoin price fell by 4 percent in the last 24 hours to around 54,000 US dollars, the lowest level since February.
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Bitcoin and Ether prices since the beginning of the year
In a week shortened by Labor Day, the overall market saw the biggest sell-off on Tuesday after weak manufacturing data stoked fears of an economic slowdown. The 11 U.S. spot bitcoin ETFs had their worst day in over four months following the report, with a total of more than $287 million withdrawn from the ETFs.
Data continued to be poor through the end of the week. On Friday, the Bureau of Labor Statistics reported a slowdown in the labor market, and August payrolls fell short of expectations.
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Coinbase is having one of its worst trading weeks this year.
“The recent U.S. jobs results were a moment of truth for risky assets like Bitcoin, as the labor market is seen as the key sector that could influence the Fed's decision to cut rates this month,” Leena ElDeeb, research analyst at ETF issuer 21Shares, said in an email.
The total cryptocurrency market capitalization has fallen by almost 30% from its 2024 peak of $2.67 trillion and now stands at $1.9 trillion. Altcoins like Solana SOL Sign, XRP and Cardano's ADA all have fallen more than 8% in the past week. Ether, the world's second-largest cryptocurrency, plunged 12% to around $2,200.
Crypto stocks hit hardest
While it was a rough week for risky assets of all kinds, investors who are overinvested in crypto stocks were hit particularly hard.
Schwab Asset Management's crypto ETF (STCE), which includes MicroStrategy, Marathon Digital, Riot Blockchain and Coinbase, fell 11%.
Coinbase, which is embroiled in a legal battle with the SEC over whether the exchange made unregistered securities sales, plunged 20 percent to its lowest level since February. MicroStrategy, the bitcoin aggregator company founded by Michael Saylor, lost 14 percent for the week, following a 12 percent plunge the week before.
The leading Bitcoin mining companies all ended the week with double-digit declines, led by CleanSparkA drop of 24%. Riot Platforms 17% lost.
The downward trend is a continuation of last month. JPMorgan Chase Analysts said in a note on Friday, citing estimates from TradingView, that despite dramatic drops in token and asset prices, trading increased in August, with average daily volume up 8% from the previous month.
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Coinbase and Marathon Digital this year
As investors focus on the future, their attention is primarily focused on the Federal Reserve.
The central bank could cut its key interest rate for the first time in four years at its meeting on September 17 and 18. Fed Chairman Jerome Powell said last month that it was “time” to adjust interest rate policy. Analysts expect a reduction of 0.25 or 0.5 percent from the current interest rate of 5.25 to 5.5 percent.
Looser monetary policy is generally a good thing for risky assets like cryptocurrencies, as they tend to see more investor money as borrowing costs fall.
The latest inflation data will be released on Wednesday with the consumer price index for August. The index is another key indicator that the Fed will consider ahead of its September meeting.
The US presidential debate on Tuesday could also prove to be a price driver in crypto markets. Republican presidential candidate Donald Trump has branded himself as a pro-crypto presidential candidate and recently headlined the biggest Bitcoin event of the year in Nashville. Many in the industry see a possible second Trump presidency as a catalyst for the industry, in part because he has vowed to oust SEC Chairman Gary Gensler, who has long been considered a crypto skeptic.
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