Bitcoin on Thursday posted its worst quarterly loss in more than a decade.
The world’s largest cryptocurrency has lost around 58% of its value in the second quarter of 2022, according to data from CryptoCompare. Bitcoin has fallen from $45,524 at the start of the quarter and was trading just below $19,000 on Thursday, the last day of the three-month period.
This is the worst quarterly performance for bitcoin since the third quarter of 2011 when it lost 68.2% of its value.
Bitcoin is down 39.8% in June and is on pace for the worst month ever dating back to 2010 when it became available on exchanges, Coin Metrics data shows.
Meanwhile, ether is down 69.3% in the second quarter and is on track for its worst quarter on record, dating back to its inception in 2015, according to Coin Metrics data.
Coin collapse, 3AC liquidation
Cryptocurrency prices have come under intense pressure this quarter amid rampant inflation which has caused central banks around the world to raise interest rates and led to a sell-off in risk assets, such as stocks and digital coins.
The crash in prices has also exposed issues with a several cryptocurrency companies and projects, particularly those in the lending space and firms that are highly leveraged.
A number of high profile issues have come to light during the quarter.
In May, the algorithmic stablecoin terraUSD collapsed along with its sister token luna. A stablecoin is a digital currency pegged to a real-world asset. TerraUSD was supposed to be pegged one-to-one with the U.S. dollar. Some stablecoins such as tether are backed by real assets like fiat currencies and government bonds. But terraUSD was governed by an algorithm which effectively failed.
Then In June, crypto lending firm Celsius paused withdrawals for its customers citing “extreme market conditions.”
Meanwhile, cryptocurrency exchange CoinFlex halted withdrawals for customers last week also citing “extreme market conditions.” But the company also claimed long-time crypto investor Roger Ver owes it $47 million after his account went into “negative equity.” Ver has denied that he owes CoinFlex money.
And the liquidity crisis has also hit prominent crypto hedge fund Three Arrows Capital which has fallen into liquidation, CNBC reported on Wednesday.
The latest downturn is being described as a new “crypto winter” and has also impacted growth and hiring at companies. Coinbase and BlockFi announced plans to lay off staff.
How does this cycle compare to the past?
Jacob Joseph, research analyst at CryptoCompare, notes that in the previous boom and bust cycle, bitcoin fell from a peak of $19,871 in the fourth quarter of 2017 to a low of $3,170 in the fourth quarter of 2018, suffering a drawdown of 8%.
Joseph said a similar fall of 82.2% was seen in 2014 when bitcoin fell from a high of $1,239 in the fourth quarter of 2013 to a low of $221 in the second quarter of 2015.
“This suggests that we could be in for a further drawdown period if the current poor macroeconomic conditions continue to persist,” Joseph told CNBC.
Other investors have expressed bearishness. In May, Guggenheim Chief Investment Officer Scott Minerd, said bitcoin could drop to $8,000. At the time, the cryptocurrency was trading at around $30,000, representing a 70% fall.
European stocks set to climb as traders assess earnings, economic data
European markets are set to advance cautiously on Monday as investors continue to monitor corporate earnings and key economic data points, assessing the risk of recession.
Britain’s FTSE 100 is seen around 19 points higher at 7,459, Germany’s DAX is expected to gain around 54 points to 13,628 and France’s CAC 40 is set to add around 21 points to 6,493.
The pan-European Stoxx 600 index closed Friday’s session down around 0.8% after an unexpectedly strong U.S. jobs report lowered expectations for a recession, and in turn increased the likelihood of the Federal Reserve tightening monetary policy more aggressively to bring down inflation.
Markets in Asia-Pacific were mixed overnight, with Hong Kong’s tech-heavy Hang Seng index weighing down the region.
U.S. stock futures were flat after the S&P 500 closed out a third straight positive week, with investors turning their attention to a key inflation report on Wednesday.
On the data front in Europe, August’s Sentix economic sentiment index for the euro zone is due Monday morning.
Corporate earnings continue to drive individual share price movement in Europe, with Siemens Energy, Porsche and BioNTech among the companies reporting before the bell on Monday.
Stocks fall after strong July jobs report points to more Fed action
Stocks fell Friday in a volatile trading session after the July jobs report was much better than expected, as investors assessed what a strong labor market would mean for the Federal Reserve’s rate tightening campaign.
The Dow Jones Industrial Average shed 96 points or 0.29%.The S&P 500 fell 0.67% and the Nasdaq Composite was down 1.01%. Losses were offset by bank stocks, which rose on hopes that interest rate hikes will continue at a solid clip. Energy stocks also gained, but technology companies slumped.
The labor market added 528,000 jobs in July, easily beating a Dow Jones estimate of a 258,000 increase. The unemployment rate ticked down to 3.5%, below the 3.6% estimate. Wage growth also rose more than estimated, up 0.5% for the month and 5.2% higher than a year ago, signaling that high inflation is likely still a problem.
Stocks opened lower following the report, even as it seemed to indicate the economy was not currently in a recession. Job growth was expected to slow as the Fed continues to hike interest rates to tame inflation, but this report shows a labor market still running hot. That means the central bank may act more aggressively at its next meeting.
“Anybody that jumped on the ‘Fed is going to pivot next year and start cutting rates’ is going to have to get off at the next station, because that’s not in the cards,” said Art Hogan, chief market strategist at B. Riley Financial. “It is clearly a situation where the economy is not screeching or heading into a recession here and now.”
The report is a crucial one as it’s one of two the central bank will see before it decides how much to raise rates at its September meeting. The Fed will have another jobs report and two more consumer price index numbers to weigh before it makes its next rate decision.
Major averages posted their best month since 2020 in July on the hope the Fed would slow the pace of its hikes. The S&P 500 added 9.1% last month.
Investors dump Chinese stocks, bonds amid global recession fears
Foreign investors continued to cut holdings in Chinese bonds in July and dumped equities for the first time in four months, according to a report by the Institute of International Finance (IIF).
Emerging markets (EM) posted a fifth straight month of portfolio outflows, setting the longest such streak in records going back to 2005, as global recession risk, inflation and a strong dollar drew away cash, the report released on Wednesday showed.
Chinese debt witnessed outflows of about $3bn last month, while $6bn exited other EM, IIF estimated.
If confirmed by official data, it would be the sixth consecutive month of foreign outflows from China’s $20 trillion bond market.
During the same period, China’s stock market witnessed $3.5bn of foreign outflows, compared with marginal inflows of $2.5bn in other EM, the global financial services trade group added.
The benchmark CSI 300 Index dropped 7 percent, down every week in July, as domestic COVID-19 flare-ups, property woes and global recession risks weighed on the market.
“China’s A-shares saw a range-bound, generally weaker trend since July under both domestic and overseas influences,” China International Capital Corporation (CICC) said in a note.
Data showed the world’s second-largest economy slowed sharply in the second quarter, missing market expectations with only a 0.4 percent increase from a year earlier.
With the fallout of the Ukraine war continuing, Sino-US tensions over Taiwan mounted as US House of Representatives Speaker Nancy Pelosi visited the self-ruled island claimed by Beijing.
“For the coming months, several factors will influence flows dynamics, among these the timing of inflation peaking and the outlook for the Chinese economy will be in focus,” IIF said.
Overseas investors have been reducing holdings of Chinese bonds since February, as diverging monetary policies kept Chinese yields pinned below their US counterparts.
The People’s Bank of China has been easing policy to aid a COVID-hit economy, while the US Federal Reserve has been hiking rates to fight soaring inflation
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