Text size
Outages were reported on a number of cryptocurrency exchanges.
Michael Nagle/Bloomberg
Bitcoin and other cryptocurrencies are diving Wednesday, and they’re taking related stocks down with them.
Several large exchanges, including
Coinbase
and Binance, experienced outages Wednesday morning. Crypto stocks are also falling hard. Shares of Coinbase Global (ticker: COIN) were off 8% to $219.
MicroStrategy
(MSTR) tumbled 10% to $437. And the broad Bitwise Crypto Industry Innovators ETF (BITQ) slid 9.5% to $20.15.
Another popular Bitcoin bet, the
Grayscale Bitcoin Trust
(GBTC), was deep in the red, down 14% to $29.58.
Bitcoin appears to be in free fall. Prices were down about 20% in the last 24 hours to $35,671, falling as low as $30,202 on Wednesday morning, according to CoinDesk. The price is now off more than 44% from its peak of $64,800 on April 15. Other cryptos are also crashing, including Ether (ETH), off 26% to $2,450.
Coinbase, the largest publicly traded exchange in the U.S., was out of commission briefly on Wednesday, showing an error message on its home page. Its app was also unavailable for trading.
“We’re seeing some issues on Coinbase and Coinbase Pro and we’re aware some features may not be functioning completely normal,” a spokeswoman said in an email to Barron’s. Coinbase appeared to be operational again around 10:45 a.m.
Binance, the largest crypto exchange by volume, was also experiencing a surge in outages, according to Downdetector.com. Reports of outages spiked to155 this morning. Binance didn’t immediately respond to a request for comment.
Trading on other platforms appeared to be available.
Square
‘s (SQ) Cash App was able to process Bitcoin orders and Webull appeared to be functioning. However, Robinhood saw a surge in server connections and login problems, according to Downdetector.
Trading crypto isn’t anything like stocks. Liquidity is relatively thin, and there are big spreads between the bid and ask prices. Commissions are steep. And as this morning’s outages indicate, the exchanges may not be equipped to handle a surge in volatility and sell orders—preventing investors from getting their money out fast.
Bitcoin has been in a selloff for months and the downturn may be only be accelerating. The latest bad tidings came from China, which reiterated a ban on cryptocurrencies for domestic financial transactions. India also plans to ban cryptocurrencies and fine anyone trading or holding digital assets, according to a report in Reuters.
Tesla CEO
Elon Musk,
meanwhile, has destabilized the market with some unnerving tweets lately. While he reiterated that Tesla hasn’t sold the crypto it accumulated earlier in the year, the fact that Tesla will no longer accept payment in Bitcoin has cast a pall over the digital currency’s push into the mainstream.
More broadly, we may be seeing a capital flight out of speculative assets like crypto as investors worry about a premature end to easy monetary policies. Crypto, special purpose acquisition companies, tech stocks, emerging markets, and junk bonds could all be in the same sinking ship.
The volatility spike and bear market in Bitcoin might also have an especially chilling effect because some new crypto investors are now experiencing a collapse for the first time. Bitcoin has gone through multiple corrections and bear markets as it has marched higher since 2017, but this may be new for people who got in very recently.
“A lot of people are underwater with their investments and it creates a potential crypto winter down the road,” says Mizuho Securities analyst
Dan Dolev.
“I’m a skeptic on Coinbase stock because 80% of its revenue is tied to retail trading fees and that’s a very risky undertaking.” He maintained a Neutral rating on the shares with a $315 price target.
Write to editors@barrons.com