Bitcoin has fallen sharply, dropping to as low as $25,350 on Tuesday. On Thursday last week, it fell 7.2%, its biggest single-day drop since Nov. 9 2022, which was the day it became clear that Binance wasn’t going to rescue FTX.
Now, crypto is caught up in what analysts call a broader “risk-off” move in financial markets, as increased expectations that the U.S. Federal Reserve will leave interest rates higher for longer has caused U.S. Treasury yields to rise over the last month or so, eventually hitting their highest levels since 2007.
Rising yields hurt riskier assets, so small companies that burn through investor cash and speculative assets like cryptocurrencies – which conversely did well when rates were low and borrowing was cheap – have been particularly hard hit.
But it can’t all be blamed on rates. Analysts also suggested (1) a lack of retail investor interest in crypto at the moment (2) a Wall Street Journal report that Elon Musk’s SpaceX had sold its bitcoin holdings after writing down the value by $373 million (3) low volatility in crypto markets and (4) hopes that the SEC would approve a spot bitcoin ETF starting to fade.
Speaking of risk, a report from the Bank of International Settlements found that in developing economies crypto assets have not only failed to deliver on their promises but are also adding to financial risks there.
Crypto assets have the “illusory appeal” of being a quick and solution for financial problems, especially in emerging markets, but “have so far not reduced but rather amplified the financial risks in less developed economies,” the report said.
Meanwhile, Sam Bankman-Fried’s lawyer said he is “subsisting on bread and water” because the jail where he is being held has not given him the vegan diet he asked for. His lawyer said a lack of adequate food and medication at the notorious jail (see last week’s story on that here) makes it harder for Bankman-Fried to prepare for his upcoming fraud trial.
