Hawkish Fed Rhetoric Lowers Crypto Stocks
Shares of companies related to cryptocurrencies have fallen, as Bitcoin fell below $20,000 in the wake of increasingly hawkish rhetoric from the Fed.
Shares of cryptocurrency miners Marathon Digital and Riot Blockchain fell 5% in the past 24 hours. Nasdaq-listed US cryptocurrency exchange Coinbase saw its stock fall 4%, while digital payments group Block lost 3%. Meanwhile, MicroStrategy, the business intelligence firm that holds extensive Bitcoin holdings, fell 5.4%.
Inflation-focused Fed
In a 10-minute speech to economists and central bankers last week, US Federal Reserve Chairman Jerome Powell indicated that the monetary authority would continue to raise interest rates aggressively until inflation reaches its 2% target.
As inflation and higher interest rates have put double pressure on the economy, investors have fled riskier assets such as cryptocurrencies and technology stocks. For example, these recent comments caused Bitcoin to fall below $20,000 for the first time since July 13th.
Bitcoin’s fall has recently mirrored stock movements, according to Sevens Report Research founder Tom Essaye. Because both are “waiting for the resolution of what’s going to happen with the economy, and nobody knows,” he doesn’t see Bitcoin as any different from stocks, he told Barron’s. After Powell’s hawkish comments on Friday, the S&P 500 took a 3.4% plunge.
Meme shares remain
Meanwhile, meme stocks, another financial trend closely linked to cryptocurrencies thanks to trading platforms like Robinhood, appear to have become something of a fixture. Nearly two-thirds of the 522 respondents to the latest MLIV Pulse survey expect some form of the meme stock craze to persist. Although the survey revealed that the meme stock is likely to hold, 69% of respondents said the phenomenon is unlikely to see the trading volumes it did during the January 2021 peak.
“We see community aspects within meme stocks, so as long as investors create community and access, they will find their way into meme stocks,” said Callie Cox, US investment analyst at eToro. “Meme stocks are just another way retail investors are getting engaged in the market.”
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