Bitcoin Tanks
Widely used to facilitate cyber crime, frustrate law enforcement, evade regulation and guzzle energy, it turns out Bitcoin is also a lousy investment.
The value of Bitcoin has dropped below $31,000 (£25,140) - less than half of what it was at its peak last November, according to the Coinbase crypto-currency exchange. The fall of the world's largest crypto currency by market value comes as stock markets around the world have also tumbled.
The European, Asian and US indexes slid lower again as investors leave riskier assets for much less speculative safer bets like the US dollar.
- Japan's Nikkei index dropped 2.5%.
- London's FTSE 100 closed down more than 2%.
- In the US, the Dow index fell nearly 2%, the S&P 500 dropped 3.2% and Nasdaq lost 4.3%.
According to industry commentators, the sluggish global economy, rising interest rates, inflationary pressure, a threatened global economic crisis and risk aversion are key reasons dragging the price of Bitcoin lower.
Uber was among the companies driving the declines and shares in the company dropped more than 11% after media outlets reported that chief executive Dara Khosrowshahi had warned staff that investors were becoming more cautious about investments. He said Uber would respond by cutting costs and slowing its hiring. "It's clear that the market is experiencing a seismic shift and we need to react accordingly," he wrote in the letter. "The average employee at Uber is barely over 30, which means you've spent your career in a long and unprecedented bull run. This next period will be different, and it will require a different approach."
In times of market uncertainty traditional investors will often sell what they see as riskier assets, like digital currency, and move their money into safer investments.
Moves in crypto currency markets have increasingly followed wider trends, as professional investors, including hedge funds and money managers, have become more active in trading what was once the domain of individual investors and enthusiasts.
Bitcoin: Accounting for about a third of the crypto currency market with a total value of close to $570bn, has seen its price plunge more than 10% in the last day and more than 20% recently.
Ethereum: The second biggest crypto-currency in the world, has also fallen in value, down by more than 20%.
Volatile trading in digital assets has not been unusual in previous years, but much of 2022 had been relatively quiet for the crypto currency market. However, central banks around the world, including the US, UK and Australia, have raised interest rates as they attempt to tackle rising prices. The US Federal Reserve raised its key lending rate by half a percentage point, marking its biggest rate hike in more than 20 years.
That has triggered more concerns among some investors that inflation and the higher cost of borrowing could have a major impact on global economic growth. They are also worried about the impact of the war in Ukraine on the world economy.
As crypto assets continue to show a strong correlation with equities, experts warn the US Federal Reserve and the conflict in Ukraine could increase bitcoin's volatility, as the principal crypto currency moves further away from its promise of becoming an immutable and decentralised hedge against the institutional financial system.
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