Cryptocurrency stocks took a big hit on Friday as a decline in U.S. stocks spilled over into riskier assets, sending Bitcoin below $66,000.
Cryptocurrency exchange Coinbase (COIN) and digital asset conglomerate Galaxy (GLXY) fell nearly 7%, while exchange Gemini (GEMI) fell nearly 9%, posting the biggest losses of the group. Crypto-friendly broker Robinhood (HOOD) also fell nearly 6% as an increased pace of share buybacks did little to arrest the downward trend.
Balance sheet plays tied to Bitcoin also declined. Strategy (MSTR) and TwentyOne Capital (XXI) fell about 6%. Ethereum-focused government bond stocks such as Bitmine Immersion (BMNR) and Sharplink Gaming (SBET) fell about 5%.
Miners, many of whom trade leveraged bets on both Bitcoin and AI infrastructure, widened the decline. Riot Platforms (RIOT), CleanSpark (CLSK), IREN (IREN), HIVE Digital (HIVE), and Hut 8 (HUT) all posted losses of 5% to 8%.
Even MARA (MARA) and BitDeer (BTDR), which outperformed Thursday, gave back all their gains and fell 6% and 8%, respectively, adding to the sector-wide selloff.
$17 trillion wipeout
The Fed faces an increasingly complex backdrop as it weighs new inflationary pressures from rising oil prices and signs of a deteriorating labor market.
Richmond Fed President Tom Barkin described the employment situation as “fragile” and warned that rising gas prices could weigh on consumer spending. Meanwhile, Philadelphia Fed President Anna Paulson said the Iran war created “new risks to both inflation and growth.”
The 10-year Treasury yield, which hit nearly 4.5% early Friday, erased the day’s gains following remarks from central bank officials. The yield on the two-year Treasury note, which is more sensitive to Fed policy, fell to 3.91% after initially rising to 4.03%.
Still, investors had largely expected interest rate cuts this year, but the face of rising inflation has led central banks to consider raising rates.
The decline over the past few months has been broad-based across stocks, with roughly $17 trillion in market capitalization wiped from its peak across the Magnificent Seven (the seven largest tech stocks, including NVDA, Google (GOOG), and Microsoft (MSFT)), gold, silver, and Bitcoin.
Bitcoin reached an all-time high of $126,000 in early October, while gold, silver and U.S. stocks have rebounded sharply after peaking in late January. Since then, Bitcoin is down about 45%, silver is down about 45%, gold is down about 20%, and the Magnificent Seven are all in double-digit drawdowns from their peaks.
The tech-heavy Nasdaq 100 index is currently in correction territory, down more than 10% from its all-time high in January. The broad-based S&P 500 index is also inching closer to correction, currently down 8.5%.
Bonds have also been hit hard, but global bond markets remain under broad pressure, with the iShares 20-Year Treasuries ETF (TLT) down about 0.3% on Friday and 5% in the last month since the conflict began.
Over the same period, the S&P 500 index fell about 6%, highlighting the underperformance of traditional 60/40 portfolios as global yields continue to rise and weigh on sovereign debt markets.
Peace of mind on Monday, risk-off on Friday
This week followed a familiar scenario seen since the start of the Middle East conflict in late February, with some relief that the “Black Monday” scenario did not occur, with a strong rally on Monday, averaging around 3%, followed by soft but steady profit-taking as the week progressed as optimism waned, especially around the opening of the Strait of Hormuz.
Performance typically worsens by Thursday and Friday as investors reduce risk ahead of the weekend amid continued geopolitical uncertainty.
