Bitcoin, Ethereum Suffer As Financial Markets Slide
Crypto Briefing | Jan 23, 2022 01:11AM ET
The top cryptocurrency has been trading below $40,000 for the second time in two weeks. Crypto assets slid further following widespread weakness in global financial markets. Rising interest rates were making future profits less attractive for risk-on assets such as technology stocks and cryptocurrencies. Bitcoin back below $40,000.
The top cryptocurrency dropped 7.1% Friday morning following continued downward momentum in financial markets. It was the second time Bitcoin has fallen through key psychological support at $40,000 over the past two weeks. After reaching highs of $43,467 on Thursday, Bitcoin, at time of writing, was trading at $38,997.
Like Bitcoin, Ethereum has also been hit hard over the past 24 hours. The second-biggest crypto asset was down 8.5% on the day, dipping below its own key support level of $3,000 to trade at $2,879.
The trend dictated by Bitcoin and Ethereum affected much of the crypto market. Some of the biggest losers during the drop were alternative Layer 1 networks. While chains such as Harmony and NEAR broke out to new all-time highs last week, their bullish momentum was short-lived. Friday morning’s drop wiped out the remainder of their gains, with NEAR shedding 12.8% and Harmony’s ONE token down 12%.
Weakness in the wider financial markets appeared to have contributed to Friday's drop. Technology stocks fared the worst, with Netflix (NASDAQ:NFLX) plummeting 20% during after-hours trading Thursday. Similarly, exercise bike maker Peloton (NASDAQ:PTON) saw a 24.5% drop following a report that the company would temporarily pause its fitness products due to slowing demand.
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European markets also opened red, with the pan-European Stoxx 600 dropping 1.4% in early trading on Friday. Like U.S. tech stocks, the European energy sector was also forecasting stunted profits for 2022. One example was wind turbine manufacturer Siemens Gamesa Renewable Energy (OTC:GCTAY), whose stock plunged more than 13% after cutting its revenue guidance Friday.
The current market climate, coupled with the Federal Reserve’s commitment to raising interest rates, is taking its toll on risk-on assets. Despite Bitcoin’s position as an inflation hedge fueling its meteoric rise at the beginning of 2021, the top crypto asset has recently started trading more in correlation with other risk-on assets such as tech stocks. If global investors continue to flee to lower-risk investments, the crypto market could face further downward pressure.
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