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The price of bitcoin dropped Thursday morning as investors broadly began shedding risk as equity markets declined. Fears of a slowing global economic comeback caused by the potential spread of the Covid-19 delta variant appeared to be behind investors move into safer assets like Treasuries.
Bitcoin traded at $32,500 Thursday morning, about a 6% decrease in the previous 24 hours according to Coin Metrics. Most other cryptocurrency assets fell with it, including ether, which is trading 9.5% lower at about $2,150.
That backslide came around the time of reports Japan has declared a state of emergency in Tokyo for the upcoming Olympics based on a potential rebound in Covid-19 cases. Stock futures fell lower on the news and companies that would benefit from an economic rebound fell in pre-market trading, including cruise lines, air carriers, Ford, Nike and even home retailers. The 10-year Treasury yield also fell to 1.25%.
Bitcoin has struggled to reclaim its May highs. Its price has been hovering in the $30,000 range, down from its all-time high of $65,000 it reached in April. Traders see bitcoin as a long-term positive despite the short-term negatives. Still, some say it could fall as low at $20,000 before institutional investors get back into it.
“We’re consolidating in here between [$30,000 and $35,000]. What we’re seeing is Asia sells it off, and then the U.S. buys it back,” Galaxy Digital CEO Mike Novogratz said on CNBC’s “Squawk Box” Thursday morning. “China has declared war on crypto as part of this broader cold war that we’re getting into, and so I think we’re still digesting that.”
On Tuesday China’s central bank called for another shutdown of a company that “was suspected of providing software services for virtual currency transactions.” For years China has regularly issued bans on the cryptocurrency industry and operations.
Investors jumped into Treasuries on Thursday, pushing the 10-year Treasury yield as low as 1.25% at one point. While bitcoin has sometimes been referred to as a hedge, the reality is it’s been quite volatile this year and tends to decrease amid broader declines in risk assets.
“There’s a lot of ownership correlated with other assets, right? So if you’re a hedge fund and you’re getting whacked in your rate position and your equity position and your oil position, you’re probably going to sell some of your crypto as well ,” said Novogratz, a longtime crypto investor. “It just takes a while for it to build a more diverse investor base.”
—CNBC’s Kevin Stankiewicz contributed reporting
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