Bitcoin crashes to $32,000 on China, Fed fears but MicroStrategy keeps buying

·Senior City Correspondent, Yahoo Finance UK
·3-min read
MicroStrategy CEO Michael Saylor speaks at the Bitcoin 2021 Convention at the Mana Convention Center in Wynwood in Miami, Florida, US, on 4 June. Photo: Joe Raedle/Getty Images
MicroStrategy CEO Michael Saylor speaks at the Bitcoin 2021 Convention at the Mana Convention Center in Wynwood in Miami, Florida, US, on 4 June. Photo: Joe Raedle/Getty Images

The crypto market was deeply in the red on Monday, extending a sell-off that began late last week and gathered pace over the weekend.

Bitcoin (BTC-USD), the world's biggest cryptocurrency, was down 5.6% to $32,200 (£23,207) by 2.15pm in London. It marked the lowest level for bitcoin in nearly two weeks.

Bitcoin dropped to its lowest level in almost two weeks. Photo: Yahoo Finance UK
Bitcoin dropped to its lowest level in almost two weeks. Photo: Yahoo Finance UK

Other major tokens were also in the red, with ethereum (ETH-USD) down 7.7% to $1,930 and XRP (XRP-USD) down 8.1% to $0.66. Dogecoin (DOGE-USD), the joke token propelled into the mainstream earlier this year, was down 18.1% to $0.21.

By Monday morning, the entire crypto market had lost 6.6% of its value over the last 24 hours, according to data provider CoinMarketCap.

The sell-off extends a slump that began late last week after the US Federal Reserve struck an unexpectedly hawkish tilt at its latest policy meeting. The central bank brought forward the timeline for future interest rate hikes, raising the prospect that cheap money may disappearing sooner than expected.

The Fed's shift in stance sparked a move away from risk assets and cryptocurrencies have been caught up in the selling. CoinDesk reported that bitcoin fund holdings hit a four month low on Friday in the wake of the Fed meeting.

"Money originates at the Fed then flows through the markets," Mati Greenspan, the founder and chief executive of Quantum Economics, told Yahoo Finance UK. 

"Now that they're talking about slowing down the pace of new money, or at least signalling that stimulus is not infinite, investors are starting to ask themselves what the true value of these assets are."

A racegoer wears a hat with a large bitcoin symbol on the side during day five of Royal Ascot at Ascot Racecourse on 19 June. Photo: Steven Paston/PA Images via Getty Images
A racegoer wears a hat with a large bitcoin symbol on the side during day five of Royal Ascot at Ascot Racecourse on 19 June. Photo: Steven Paston/PA Images via Getty Images

Headlines about an ongoing Chinese crackdown on cryptocurrency didn't help sentiment over the weekend. The Block, a cryptocurrency industry website, reported that regulators in Sichuan province had issued a statement ordering crypto miners in the region to shut down.

Ruud Feltkamp, chief executive of crypto trading bot Cryptohopper, said: "People still react strongly to actions from China that create uncertainty, so this is likely to reflect negatively on the Bitcoin price."

Feltkamp and other industry experts said the crackdown would likely have a short-term effect on mining capacity and prices but would likely just drive miners to relocate, rather than exit the industry altogether.

"Worldwide, miners continue to generate on average $30m daily, which shows the industry is still highly profitable," said Ulrik K. Lykke, executive director at digital asset fund ARK36.

"It can be reasonably expected that the miners will simply move elsewhere if uncertainty for the Chinese operators persists."

David Marcus, the former PayPal (PYPL) executive who now runs Facebook's (FB) cryptocurrency projects, tweeted that China's bitcoin mining crackdown was a "great development" because it would encourage more mining capacity to move to the West.

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Bitcoin's price remained under pressure despite news on Monday afternoon that software company MicroStrategy (MSTR) had spent another $489m on bitcoin. The company, which now has over $2.7bn invested in the cryptocurrency, said in a statement it had purchased around 13,005 bitcoins at an average price of approximately $37,617.

MicroStrategy, a business intelligence firm, is run by vocal bitcoin bull Michael Saylor. Shares in the company slumped 7% at the open in New York.

Watch: What are the risks of investing in cryptocurrency?

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