Bitcoin sees its worst weekly slump since March

By Rahul Vaimal, Associate Editor
  • Follow author on
Bitcoin Image
Representational Image

The world’s largest cryptocurrency Bitcoin’s valuation hit a speed bump as the digital currency experienced its worst weekly decline in almost a year amid wider losses in risk assets.

This week, the digital token slumped 20 percent, the most since the pandemic-fueled selloff last march. The wider Bloomberg Galaxy Crypto Index, monitoring Bitcoin, Ether, and three other cryptocurrencies, was also down by 23 percent.

The decline in Bitcoin comes amid increasing global market volatility, as a surge in bond yields indicates growing expectations of higher growth and inflation, forcing traders to reconsider their positions throughout multiple asset classes. As stocks like Tesla and Peloton Interactive slumped, Nasdaq 100 dropped the most since October this week.

Mr. Vijay Ayyar Head of Asia Pacific for cryptocurrency exchange Luno in Singapore remarked that “Risk-on assets are taking a hit at the moment, we’re seeing stocks slide and crypto is following. The dollar is strengthening, which is a good indication to expect a slide in Bitcoin and crypto”.

Bitcoin’s weakness in the face of market gyrations poses concerns about its efficacy as a store of value and hedge against inflation, a central claim among proponents of its stunning rally over the past year. Detractors have retained the growth of digital assets as a speculative bubble and it’s destined for a repeat of the 2017 boom and bust.

Mr. Ayyar points out that heavy selling in the Grayscale Bitcoin Trust, the world’s largest such fund, as well as the expiry of Bitcoin options are also contributing to the volatility. The trust slumped 24 percent this week, with losses racing past its underlying asset, as a once-massive price premium over Bitcoin turned negative with investors cashing in on those gains.

Recently, influential figures have also weighed in on Bitcoin around the financial world.
Tesla Chief Executive Mr. Elon Musk commented “seem high” on the weekend, seen by some as an initial catalyst for the week’s selloff.

Related: Facebook rolls out TikTok-like app for rap lovers