Why Did Cryptocurrencies Experience Massive Declines on Global Stock Markets?

Published October 14th, 2018 - 02:37 GMT
Global economist Nouriel Roubini, who predicted the financial crisis in 2008, warned that the hype of crypto-assets is dangerous. (Shutterstock)
Global economist Nouriel Roubini, who predicted the financial crisis in 2008, warned that the hype of crypto-assets is dangerous. (Shutterstock)

Bitcoin and other major cryptocurrencies saw more losses on Friday morning in Asia, due to the recent slump in global equity markets thanks to the escalating trade war between the U.S. and China as well as central banks driving up interest rates.

Bitcoin edged down 0.22% to $6,282.3 at 11:06 PM ET (03:06 GMT) on the Bitifinex exchange.

Ethereum tumbled 4.03% to $196.51 on the Bitifinex exchange.

XRP slid 7.34% to $0.39555 on the Poloniex exchange, while Litecoin also fell 2.51% to $51.801 on the Bitifinex exchange.

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Some economists are increasingly critical of cryptocurrencies. Global economist Nouriel Roubini, who predicted the financial crisis in 2008, warned that the hype of crypto-assets is dangerous.

“Crypto is the mother or father of all scams and bubbles,” he told the U.S. Senate Committee on Banking, Housing and Community Affairs during a recent hearing, CNBC reported.

Roubini said people asked him frequently about whether they should purchase digital tokens, “especially folks with zero financial literacy – individuals who could not tell the difference between stocks and bonds – went into a literal manic frenzy of Bitcoin and crypto buying.”

He accused “scammers, swindlers, criminals, charlatans, insider whales and carnival barkers,” who misled “clueless retail investors’ FOMO [fear of missing out]” for “scammy crappy assets at the peak that then went into a bust and crash – in a matter of months – like you have not seen in any history of financial bubbles.”

The slide in stock markets also affected confidence in the digital tokens market. Quartz’s John Detrixhe said that investor’s risk aversion might be creeping into crypto assets. He also said bitcoin’s price fell below the cost of electricity needed to mine the digital tokens, which could be another reason for the dip.

Meanwhile, the S&P 500 went down 2.06%, hitting a three-month low on Thursday after a 3.29% slide on Wednesday. Dow 30 and Nasdaq also fell 2.13% and 1.25% respectively on Thursday, while the U.S. dollar index dropped below 95 at 94.69.

U.S. President Donald Trump has blamed the Federal Reserve for increasing interest rates.

“I think the Fed is making a mistake. They are so tight. I think the Fed has gone crazy. Actually, it’s a correction that we’ve been waiting for for a long time, but I really disagree with what the fed is doing,” said Trump on Wednesday.


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