Cryptocurrencies whipped by flight from risk

Cryptocurrencies were caught in a broad flight from risk assets on Friday, sending bitcoin and ether to multi-month lows as worries persisted about lofty tech valuations and bets on near-term Federal Reserve policy easing faded.

Bitcoin , the world's largest cryptocurrency, fell 2.1 percent, breaking below US$86,000 to hit a seven-month trough of US$85,350.75 in Asian trading. Ether also slid more than 2 percent to its lowest in four months at US$2,777.39.

Both tokens were staring at weekly losses of roughly 8 percent.

Cryptocurrencies are often used by investors as a barometer of risk appetite and the sharp slide shows how fragile the mood in the market has turned in recent days, with high-flying artificial intelligence stockstumbling and volatility spiking.

"If it's telling a story about risk sentiment as a whole, then things could start to get really, really ugly, and that's the concern now," Tony Sycamore, a market analyst at IG, said of the fall in bitcoin.

About US$1.2 trillion has been wiped off the total market value of all cryptocurrencies in the past six weeks, according to market tracker CoinGecko.

Prices of Hong Kong-listed spot bitcoin ETFs launched by China AMC (3042), Harvest (3439), and Bosera (3008), fell close to 7 percent each on Friday.

FALL FROM GRACE

The slide in bitcoin has come hard and fast following a stellar run this year that propelled it to a record high above US$120,000 in October, buoyed by favourable regulatory changes towards crypto assets globally.

Analysts say the market remains scarred by a record crypto crash last month, which saw more than US$19 billion in liquidations across leveraged positions as panic selling and low liquidity triggered sharp swings.

"The market feels a little bit dislocated, a bit fractured, a bit broken, really, since we had that selloff," said Sycamore.

Bitcoin has since erased all its year-to-date gains and is now down 8 percent for the year, while ether has lost close to 16 percent.

The selloff has also hurt share prices of crypto stockpilers, following a boom in public digital asset treasurycompanies this year as corporates took advantage of the rising prices to buy and hold cryptocurrencies on their balance sheets.

Shares of Strategy, once the poster child for corporate bitcoin accumulation, have fallen 11 percent for the week and are languishing at one-year lows.

Its Japanese peer Metaplanet has tumbled about 80 percent from a June peak.

"Bitcoin market conditions are the most bearish they have been since the current bull cycle started in January 2023," said digital asset research firm CryptoQuant in its weekly crypto report on Wednesday.

"We are highly likely to have seen most of this cycle's demand wave pass."

REUTERS