This sell-off in cryptocurrencies occurred in parallel with a broader decline in Asia-Pacific stock markets. Japan's Nikkei 225 fell by 7%, extending the previous week's losses after the Bank of Japan's decision to raise its benchmark interest rate to the highest level in 16 years.
In the United States, the Nasdaq index fell by 3.4% last week, entering a correction zone and posting its worst three-week performance since September 2022. Major tech stocks such as Amazon and NVIDIA contributed to the decline.
The recent drop in equity prices has been driven by disappointing earnings reports, a weaker-than-expected employment report, rising unemployment, and a decline in the manufacturing sector. The decision of the US Federal Reserve to leave the benchmark interest rate unchanged, without promising to cut it in September, also affected market sentiment. Lower interest rates tend to benefit risky assets.
Bitcoin's price reached its lowest level since February, trading at $54,000, although it has grown by almost 23% over the year. Ethereum dropped to $2,300, reversing its yearly gains. Other cryptocurrencies, such as Binance's BNB token and Solana, also experienced a drop of more than 15% and 10%, respectively.
Investors are currently awaiting new trade data from China and Taiwan this week, as well as decisions by the central banks of India and Australia.
The latest downturn in the cryptocurrency market will affect a wider range of investors after the SEC approved new spot exchange traded funds (ETFs) for Bitcoin and Ethereum earlier this year. These ETFs have already attracted hundreds of millions of dollars in investment. Morgan Stanley will soon also allow its 15,000 financial advisors to offer Bitcoin ETFs to clients, a significant development for Wall Street.