Stocks and Cryptos Drop, Ending Historic Rally
23 Feb 2021 · 3rd Party Analysis
- Tech stocks continue to slide
- Bitcoin drops below $50,000
- Elon Musk loses $15bn in one day
Benchmark European indexes continue their decline on Tuesday as investors became increasingly worried about the sustainability of the recent historic rally to record highs. US futures indicate a lower open, adding to the losses from Monday. Tech stocks yesterday led the decline with the Nasdaq Composite down 2.5%. Technology stocks started the week with a sharp drop. Apple shares fell 3.00%, Amazon shares declined 2.00% and Microsoft stock slid 2.70%. The tech sell-off was fueled by fears about rising inflation as well as rising long-term interest rates.
Inflation concerns are linked to President Joe Biden’s proposed $1.9tn American Rescue Plan. Investors fear the release of economic aid could push up prices. Additional fears arise over concerns that the Federal Reserve could decide to retain its ultra-loose monetary policy. Later today, Federal Reserve Chairman Jerome Powell is expected to deliver its semi-annual testimony before Congress and investors will be watching for clues.
Elon Musk’s Colossal Losses
Heading to cryptocurrencies, bitcoin dropped below $50,000 as the market retreated from its overly optimistic approach towards the crypto space. The world’s largest digital coin is down over 20% this week, ending the monstrous rally that unfolded in the past few weeks. Bitcoin remains well up this year with a rise of 65% to the current market price of $48,000. On Sunday, bitcoin reached an all-time high of $58,300. Ethereum, the second most valuable coin, also experienced a decline of over 20%. The second-largest player in the crypto space was trading above $2,000 on Sunday and is now hovering towards $1,500.
Recent comments made by Treasury Secretary Janet Yellen, Microsoft co-founder Bill Gates and Tesla CEO Elon Musk were the latest to weigh over the valuation of the crypto market. Treasury’s Yellen criticized bitcoin and labeled it as “inefficient” and highly speculative. “People should beware it can be extremely volatile and I do worry about potential losses that investors could suffer,” Janet Yellen said in an interview. “It’s an extremely inefficient way to conduct transactions,”, she continued, adding that she fears it’s often used for money laundering and illegal activities.
Bill Gates urged investors to be cautious about their approach to bitcoin and other cryptocurrencies. “I do think people get drawn into these manias who may not have as much money to spare. So I’m not bullish on Bitcoin, and my general thought would be: if you have less money than Elon, you should probably watch out” Mr. Gates said in a TV appearance yesterday.
Microsoft co-founder also addressed the coin’s energy consumption: “There are things we invest in in society which produce output. Bitcoin happens to use a lot of energy. It happens to promote anonymous transactions — they’re not reversible transactions,” said Gates.
Elon Musk, who just lost his number one spot as the world’s wealthiest man, recently published tweets in which he said the price of bitcoin “seems high”, also noting that the token is a “less dumb” form of cash. Tesla shares tumbled 8.5% yesterday, resulting in a $15bn decline in Elon Musk’s wealth.