Key Market Points
Nasdaq down ~0.7%, S&P 500 dips, Dow modestly green
January ISM Non-Manufacturing PMI 53.8 vs 53.5 estimate
Euro STOXX 600 index up ~0.6%
Dollar, crude rise; gold up >1%; bitcoin off >1.5%
US 10-Year Treasury yield flat at ~4.27%
Bitcoin and Ethereum Face Extended Losses
Bitcoin and Ethereum are heading into another month of losses and the debate is heating up over what lies ahead.
The world's most valuable cryptocurrency has fallen nearly 40% from its record high in early October and more recent losses had investors liquidate $2.56 billion according to CoinGlass earlier this week.
Similarly, Ethereum is heading for its sixth-straight month in losses and has lost half its value since its all-time high in August.
Analysts Point to Structural Issues
Andrew O'Neill, analytical lead on Digital Assets at S&P Global, attributes recent losses to the unwind of leverage in the bitcoin perpetual futures market, along with liquidity constraints driven by uncertainties over tariffs and Japanese interest rates.
Bitcoin's properties, at one time, had some analysts liken it to gold. But 'Big Short' Michael Burry says it's got more pain than gain ahead.
In a note earlier this week, he said bitcoin is emerging more into a speculative trade, rather than an asset that investors consider seriously, and it's that speculation that sparked a selloff in precious metals over the past few days.
Market Contagion Effects
According to Burry, bitcoin's declines triggered a selloff in tokenized silver and gold futures on crypto exchanges that are traded using crypto assets as collateral, but not backed by the precious metal. This consequently sent traditional derivatives into a wider spiral.
He says much of this free-fall also has to do with weakening price floors which included its popular use for untraceable transactions and institutional buying.
Bankruptcy Risks Loom
If losses deepen, bankruptcies are on the horizon, Burry says, adding that the recent Metropolitan Capital Bank & Trust's shutdown in Chicago could be related to such forced collateral liquidations.
Bitcoin breaking at $60,000 would mean the largest hoarder of the cryptocurrency, Strategy (MSTR), would face an existential crisis and at $50,000, miners would go bankrupt and be forced to sell their BTC reserves, Burry said.
The dwindling value of bitcoin holdings had investors on edge about Strategy's future in major indexes.
But S&P Global says that the software-turned crypto treasury firm has available liquidity for the short term, adding that regulatory clarity on blockchain technology could be a favorable shift for the industry overall.
#BTCReservePlan #RiskManagementMastery #MicroStrategy