Cryptocurrencies suffered dramatic losses Monday, as global markets continued to respond to unexpectedly high inflation data released in the U.S. Friday. It is just the latest blow to financial instruments intended, in part, to hedge against inflation. And for many investors, the question of should I buy Bitcoin, and when, has suddenly taken on fresh urgency.
Bitcoin dived more than 13%, to just above $22,000 on Monday. That put the cryptocurrency more than 65% below its November all-time-high near $68,990. About 50% of that occurred in the first six months of the year. Ethereum, the second-largest cryptocurrency, is in an even greater tailspin. Its ETH token also plummeted more than 13% Monday, and is down 75% from historic highs set in November. It is currently trading below $1,200 per token.
"With the loss of liquidity, we will likely continue to see a sell-off on what some investors consider their 'risky' assets. So crypto, high multiple stocks, even cannabis stocks," said Noah Hamman, CEO of Maryland-based AdvisorShares. His investment firm launched its Managed Bitcoin Strategy ETF (CRYP) on April 27 and immediately underwent a baptism by fire.
Should I Buy Bitcoin While ARKK Is Sinking?
Like most public investment vehicles, Bitcoin prices move largely according to investor confidence and activity. That confidence, in the case of Bitcoin and other cryptocurrencies, is based on future expectations, according to Matthew Sigel, head of digital asset research at New York-based VanEck. Digital assets have been most associated with the tech market, which has seen broad losses amid the market's recent volatility. Cathie Wood's flagship ARK Innovation ETF (ARKK), focused on disruptive tech and blockchain stocks like Zoom (ZM), Tesla (TSLA), Block Inc (SQ) and Coinbase Global Inc. (COIN), is indicative of the trend. ARKK's share price has dropped 61% to about $38.23 so far this year, and is 77% below its Feb. 2021 high.
