Wild Wednesday: Crypto in full blown meltdown as inflation concerns roil global markets
Crypto currencies have gone into full blown meltdown with Ethereum falling 40 per cent at one point today, while Bitcoin prices have slumped below $40k as the sell-off gains further traction, after Chinese regulators took steps to discourage the use of crypto.
The Peoples Bank of China said earlier today that cryptocurrencies should not be used or accepted as a means of payment.
“This isn’t the first time that China has tried to curb the use of cryptocurrencies, given that it’s in their interests to do so if they want to promote their own digital currency,” commented Michael Hewson, chief market analyst at CMC Markets UK.
Copper prices have also rolled over after it was reported that Chinese regulators were looking to implement curbs on “unreasonable commodity price rise.”
Meanwhile, gold prices have hit their highest levels since early January on the back of today’s sell-off in equity markets
Inflation risks
Having posted a new record high only yesterday, the DAX has slid for the second day in succession, along with the rest of Europe’s markets.
The FTSE100 also fell back sharply towards last week’s lows, over concern that supply chain, as well as worker shortages could threaten the economic recovery.
“As a consequence this could mean that inflationary pressures might become more persistent in the longer term,” Hewson said.
“While stock market investors appear to be concerned about increasing inflation risk, given that appears to be today’s narrative, bond markets appear less so if US 10-year yields are any guide to today’s price action. They are slightly lower,” he added.
“That said, weakness in commodity prices isn’t exactly helping sentiment either, after Chinese authorities suggested curbs on aggressive increases in prices which has clobbered the mining sector, with the likes of Antofagasta, Anglo American, BHP, Rio Tinto and Glencore all down heavily,” Hewson continued.
BAE Systems has painted a fairly positive picture outlook wise, saying that orders are ahead of expectations, with new contracts across all their businesses. The company reiterated its full year guidance.
Across the pond
Having seen a modest decline yesterday, US markets have picked up where they left off opening sharply lower, with big tech in particular seeing some of the heaviest losses, as US stocks look to close lower for the third day in a row.
A big decline in Bitcoin is hitting Tesla shares, along with Coinbase which has plunged below its $250 IPO indicative price to record low close to $200.
Tesla has fallen sharply, already below its 200-day MA, it has also broken below its long-term trend line from the March 2020 lows opening up the prospect of further losses if it breaks below its March lows at $540.
“We’ll aget to see the latest Fed minutes later this evening, however given that they were from last month, and pre-payrolls surprise, they probably won’t tell us that much,” Hewson said.
“We already know from the recent utterances of various Fed policymakers over the economic outlook, including vice chair Richard Clarida that a taper is some way off, so it’s tempting to suggest that they probably won’t tell us anything that we don’t already know, given how chatty various FOMC members have already been over the past few days,” he added.