Nov 20, 2018

Bitcoin and other cryptocurrencies are tanking

Cryptocurrency markets have plunged in the past week, with Bitcoin falling to its lowest level in over a year.

The bottom line: The recent drop has caused even market bulls like Fundstrat Global's Tom Lee to cut year-end forecasts.

Data: CoinDesk; Chart: Harry Stevens/Axios

Some possible factors in the plunge, based on conversations with market participants:

  • Bitcoin Cash's fork on Thursday: The split, which resulted in two different versions of Bitcoin Cash and a 30% value destruction, was driven by developer disagreements over the cryptocurrency's future and technology. Bitcoin Cash itself was born last year out of a similar disagreement).
  • The SEC's recent settlements and statement: It's becoming clear that a lot of initial coin offerings (ICOs) will qualify as securities, and the SEC is making two issuers refund investors (in U.S. dollars) if they ask for it. This particular requirement (and the anticipation of it by savvier companies) has likely caused some of the sell-off as issuers seek to gather U.S. dollars.
  • Locking in losses for tax purposes: "It is very common to do this and we hear it from clients," Bitwise CEO Hunter Horsley tells Axios. "They can use losses in crypto to offset other gains." 
  • The run-up in late 2017 was artificial: There are some who believe Bitcoin's price peak was facilitated by market manipulations, namely through Tether's token pegged to the U.S. dollar. The price decline we're seeing now is the market returning to pre-mania levels, says Neural Capital managing partner Ari Nazir. Bitfinex, an exchange linked to Tether, is reportedly under criminal criminal investigation.
  • Doubts over Bitcoin mining profitability: This is likely causing a number of miners to reconsider their activities, further affecting the price.

Yes, but: Despite the abundance of punditry available on Twitter, it's always hard to truly peg the cause(s) of cryptocurrency market moves, as experts admit to Axios.

Go deeper

Powell and the risk-off bull market

Jerome Powell. Photo: Alex Wong/Getty Images

The Fed’s 180-degree turn was the story of 2019, asset managers and market analysts say.

What happened: Chairman Jerome Powell and the U.S. central bank went from raising interest rates for a fourth time at the close of 2018 and giving market watchers the explicit expectation this would continue in 2019, to doing the opposite. The Fed cut rates thrice and even began re-padding its balance sheet in the last quarter of the year, bringing it back above $4 trillion.

Go deeperArrowJan 2, 2020

The Fed plans to keep pumping cash

Illustration: Aïda Amer/Axios

The New York Fed added $83.1 billion in temporary liquidity to financial markets Thursday, and the U.S. central bank looks primed to keep pumping cash for at least the next few months.

Why it matters: The stock market's 30% gain in 2019 was in no small part backed by the Fed's decision to cut U.S. interest rates three times and inject more than $1 trillion of temporary financing into the repo market. It also added more than $400 billion to its balance sheet in the fourth quarter.

Go deeperArrowJan 10, 2020

AMD's hot 2020 start could lead to another S&P record

Data: Investing.com; Chart: Axios Visuals

AMD was the best-performing stock on the S&P 500 in both 2018 and 2019, and it got off to a hot start in 2020, rising 7.1% on Thursday to touch a fresh all-time high.

The state of play: The stock rose nearly 80% in 2018, despite falling 40% during that year's disastrous fourth quarter, and it gained 148% in 2019, according to MarketWatch. The company's previous record high stock price was set June 21, 2000.

Go deeper: