Shock To Crypto Daredevils Joins List Of Market Omens
The Straits Times|December 07, 2021
Losses pile up for retail dip-buyers; market retreat shows Bitcoin to be imperfect hedge
Shock To Crypto Daredevils Joins List Of Market Omens

NEW YORK A brutal bout of selling that wiped billions of dollars from profitless growth companies, initial public offering stocks and special purpose acquisition companies (Spacs) has caught up with Bitcoin, further stressing risk tolerances and brokerage balances among small-time traders.

Retail dip-buyers, whose willingness to stand firm amid turmoil helped power the S&P 500 to a 21 per cent gain this year, are nursing some of their worst wounds of the year as losses pile up.

A hawkish turn from the US Federal Reserve and the Omicron variant have erased more than 10 per cent off the market value of cryptocurrencies, US$50 billion (S$68.6 billion) from newly public companies and 14 per cent from a basket of meme stocks.

Professional speculators have already voted, offloading risk at the fastest pace in 20 months. Big drops in an asset like Bitcoin have the potential to lower confidence among the larger population of bettors, a concept described as negative wealth effect.

All told, crypto investors have some US$250 billion less to play within their accounts than they did when stocks starting sliding on Nov 26. It is a worrisome backdrop for the market.

This story is from the December 07, 2021 edition of The Straits Times.

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This story is from the December 07, 2021 edition of The Straits Times.

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