FTSE 100 claws back some losses but sell-off hits crypto wallets with bitcoin dropping below $30,000

Susannah Streeter, Senior Investment and Markets Analyst at Hargreaves Lansdown, takes us through the recent market fluctuations...

The FTSE 100 is clawing back some of its losses, up by around 1%, but it’s an uphill struggle after around £54 billion was wiped from the value of UK shares yesterday. ITV led the bounce back pack, rising by 2.7% after topping the fallers board yesterday, but the shares are still around 5% below Friday’s closing price. 

Although bargain hunters will be sniffing around, nervousness is still largely the sentiment rippling through the markets, as concerns are growing that higher infection rates will bring about a fresh economic slowdown. It isn’t just the spread of new variants causing jitters, rising tensions between the US and China are also a worry, after the Biden administration accused Beijing of being behind the hack of Microsoft’s exchange email server software. As China grows increasingly isolated, it’s sparked fresh worries that global trade will suffer as a consequence.

Bitcoin has not been immune to market volatility and is another casualty of the sell-off across financial markets. Investors edged away from crypto wallets after stocks plunged, with Bitcoin dropping below $30,000 to hit $29,577 the lowest level since June 22. Ethereum and Dogecoin  have also suffered steep falls over the past 24 hours, with Cardano falling by more than 10% as investors pulled back from riskier assets in the search for safety. 

As crypto holdings dropped, demand for government bonds have risen, with yields on 10 year treasuries falling to their lowest level in five months. In such a volatile market it seems more investors are heeding warnings from financial watchdogs, that they could risk losing all their money if they hold risky crypto assets. 

Other traders are likely to be watching closely, to buy into assets they consider a cheap price, confident in the longer term outlook for crypto. But this sell off also comes as speculation mounts about what impact the development of central bank digital currencies will have on the crypto world, and whether the establishment of CBDCs will dent the long term crypto use case. The intensifying crackdown in some parts of the world, with Indonesian authorities destroying bitcoin mining factories using energy illegally, has again shone the light on crypto as a magnet for criminals.