- The Hang Seng index plunged by more than 3% on Wednesday.
- Other Asian indices like KOSPI and China A50 also crashed.
- Cryptocurrency prices remained on edge as this sell-off happened.
Cryptocurrency prices remained on edge on Wednesday as investors focused on the rising bond yields and the plunging Asian stocks. Bitcoin was consolidating at $43,000 as investors sold the spot Bitcoin ETF news. Solana remained stubbornly below $100 while Ethereum and Render token were relatively unchanged.
Global stocks sink
Cryptocurrencies have done modestly well even as global stocks have plunged. On Tuesday, the Dow Jones, S&P 500, and Nasdaq 100 indices retreated by more than 0.80%. This plunge coincided with the sharp increase of US bond yields as the crisis in the Middle East continued.
The same trend continued in Asia, where some of the most notable indices continued their sell-off. In Hong Kong, the Hang Seng index plunged by more than 3% and crashed to $15,387. While most of its peers are hovering near their all-time highs, the Hang Seng has dropped to its lowest level since November 2022 and has crashed by over 53% from its all-time high, which it reached in 2018.
In South Korea, the KOSPI index plunged to KRW 2,445, much lower than the December high of over KRW 2,700. It has now retreated in the past three consecutive weeks. In mainland China, indices like the Shanghai Composite and China A50 continued falling.
This retreat happened after China published economic numbers that missed analyst estimates. The Chinese economy expanded by 5.2% in the fourth quarter, missing the 5.3% estimate that analysts were expecting. It had increased by 4.9% in the previous quarter.
Other numbers in the report showed that retail sales rose by 7.4% in December, also missing the estimated 8.0%. The unemployment rate rose from 5.0% to 5.1%. These numbers mean that the Chinese economy is not doing well.
However, some analysts believe that 2023 was a transitory year for China as it emerged from the Covid-19 lockdowns. As such, the hope is that the economy will continue the slow recovery we saw in the second half of the year.
Cryptocurrency prices stable
Crypto prices have remained stable in the past few days even as global risks have jumped sharply. Bitcoin has remained above $40,000 even as investors sold the Bitcoin ETF approval news. This selling pushed it from $49,000 to $41,000 this week. It has now bounced back to $43,000 as investors wait for the next catalyst.
One of the biggest risks for cryptocurrencies is that the crisis in the Middle East is leading to higher inflation by disrupting trade flows. Shipping prices have jumped, with the container index hitting over $3,000 from $1,300 in December.
The impact of all this is that it could push central banks to push back against interest rate cuts. In its December meeting, the Fed was hinting at 3 rate cuts this year. If inflation remains strong, it could delay these cuts. In most cases, cryptocurrencies do well when the Fed is dovish.
