The stocks of companies related to cryptocurrencies have slumped, as Bitcoin slipped below $20,000 in the aftermath of increasingly hawkish rhetoric from the Fed.
Shares of cryptocurrency miners Marathon Digital and Riot Blockchain were down 5% over the past day. Nasdaq-listed US cryptocurrency exchange Coinbase saw its stock drop 4%, while the digital payments group Block lost 3%. Meanwhile, MicroStrategy, the business intelligence firm that retains extensive Bitcoin holdings, fell 5.4%.
US Federal Reserve Chairman Jerome Powell gave a 10-minute-long address to economists and central bankers last week, indicating that the monetary authority would keep aggressively raising interest rates until inflation is reigned in to its target of 2%.
As inflation and higher interest rates have been applying dual pressure on the economy, investors have fled riskier assets like cryptocurrencies and tech stocks. For instance, these recent comments caused Bitcoin to fall below $20,000 for the first time since July 13.
Bitcoin’s fall has lately mirrored the movement of stocks, according to Sevens Report Research founder, Tom Essaye. Because both are “waiting on 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. Following Powell’s hawkish comments on Friday, the S&P 500 took a 3.4% plunge.
Meme stocks to remain
Meanwhile, meme stocks, another financial trend closely associated with cryptocurrencies thanks to trading platforms like Robinhood, seem to have become something of a fixture. Nearly two-thirds of the 522 respondents in the latest MLIV Pulse survey expect some form of the meme stock mania to persist. Although the survey revealed that the meme stock will likely stick around, 69% of respondents said the phenomenon is unlikely to see the trading volumes as it did during its January 2021 peak.
“We see community aspects within meme stocks, so as long as investors create community and access, they’ll find their way into meme stocks,” said Callie Cox, US investment analyst at eToro. “Meme stocks are just another way that retail investors are getting engaged with the market.”
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