Cryptocurrencies Tumble Most in Two Months as Dollar Jumps
The Bloomberg Galaxy Crypto Index fell as much as 6.5% led by Bitcoin, Ether.
(Bloomberg) -- Cryptocurrencies sold off on Wednesday, with the Bloomberg Galaxy Crypto Index dropping the most in more than two months.
The gauge, which tracks some of the largest cryptocurrencies including Bitcoin, Ether, XRP and Bitcoin Cash, fell as much as 6.5%, the biggest drop since June 11. Bitcoin and Ether together make up more than half of the index, while XRP constitutes about 20%.
The moves can, in part, be explained by strength in the dollar, according to Mati Greenspan, founder of Quantum Economics. The dollar rose after the Federal Reserve minutes signaled downward revisions to economic projections. Greenspan closed a few of his crypto positions after seeing them gain on Wednesday.
“Like any other commodity, it has somewhat of an inverse correlation with the dollar,” he said by phone.
Recent dollar weakness had been a bit of a “rally cry” for Bitcoin and peer currencies, added Greenspan. Bitcoin, which is the world’s largest digital coin, this month rallied above $12,000, a key level watched by chartists and crypto fans. On Wednesday, it fell to as low as $11,621.
Oversupply and speculation remain obstacles for cryptocurrencies, says Mike McGlone, an analyst with Bloomberg Intelligence. In addition, because Bitcoin tends to pull the broader crypto market higher, cryptocurrencies in general could get hit more disproportionately when the coin declines.
Still, something unexpected would have to happen for Bitcoin to stop appreciating as it has over the past decade, said McGlone. “Demand and adoption metrics remain favorable vs. the crypto asset’s unique attribute of fixed supply,” McGlone wrote in a note.
©2020 Bloomberg L.P.