Cryptocurrency prices extended their slide to 7% for the week, with declines across the board but concentrated on tokens other than market leaders bitcoin and ether as investors appear to be adopting risk-off strategies.
BitcoinBTC and ether now make up 63% of the total $1.24 trillion cryptocurrency market, up from 55.8% at the end of last year. This week’s pullback comes after the market recovered from a low of about $828 billion at the end of 2022, a year of widespread bankruptcies and other disruption for digital assets.
The risk-off sentiment was evident in the bond market on Thursday, where the yield on the 10-year Treasury bond fell 6 basis points to 3.55%. Investors seem to be reacting to the possibility the United States will default on its debt as the White House and House Republicans battle over raising the ceiling on borrowing. The U.S. reached its $31.4 trillion statutory limit in January, but the Treasury has been able to stave off a crisis with emergency spending reductions.
Ironically buyers are flocking to the very bonds that would be in default, accepting ever-lower yields as the situation plays out in Washington. Treasuries, however, often find favor in tumultuous markets. Short-term yields are higher, as much as 5.06% for three-month Treasuries, an unusual situation vis-a-vis longer-maturity bonds that can presage a recession.
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While the broad stock-market averages were only fractionally lower, crypto mining shares took a hit. CleanSpark, a sustainable bitcoin miner, leads the pack down 10.7%. Riot Platforms, Bitfarms and Marathon Digital were all down more than 8% lower, giving back some of the 40% gain the sector saw last week after investor confidence in the digital-asset sector turned positive.
Microstrategy, the business software company with a 140,000-token stake in bitcoin fell 6.3%, worse than the underlying cryptocurrency itself. Bitcoin itself fell 3.6% to $28,234.55 per coin. The leading cryptocurrency briefly peaked on Tuesday at $30,365 before a steady decline that brought it to a 10-day low.
Ether followed suit, dropping 2% to $1,938.37. Ether had a milder drop than bitcoin as withdrawals of f staked crypto that had been locked on the EthereumETH blockchain remained modest at about $1.6 billion of the $38 billion total, according to data provider Nansen. Some of those coins had been frozen since December 2020 but were freed as part of the most recent upgrades to Ethereum.
Ethereum gas fees have also increased in the last week, largely due to memecoin minting. The average gas fee, a transaction fee paid to the Ethereum network, went up to 81.94 gwei on Wednesday, more than doubling since Monday. A gwei is a fraction of an ether, equal to one billionth of the coin.