The selling of risky assets became frenetic last week due to fears of a recession sparked by weak economic data, and U.S.-listed shares of companies linked to the cryptocurrency market plunged along with Bitcoin, which fell more than 15% on Monday.
The market, which was up until recently experiencing optimism due to the approval of exchange-traded funds (ETFs) linked to the spot prices of ether and bitcoin, the two largest cryptocurrencies, has seen a startling reversal due to the plunge.
Sentiment was further buoyed by Republican presidential candidate Donald Trump’s pro-crypto speech at a Bitcoin conference last month, but data indicating weak manufacturing and higher unemployment squeezed risky assets.
The quick response of Bitcoin, the only market that is traded on weekends, is not surprising. According to a note written by Bernstein analyst Gautam Chhugani, “We don’t see any incremental negatives for crypto here.”
Bitcoin’s reputation as a safe-haven asset has been weakened by its growing correlation with equities, but some analysts maintained that investing directly in the currency was still preferable to gaining exposure to it through proxies like ETFs and crypto-related stocks.
According to Joshua Peck, the founder of the cryptocurrency hedge fund TrueCode Capital, “If this weekend serves as a reminder of anything, it is the importance of investing in digital assets directly on native crypto exchanges.”
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