Bitcoin Drops as Tremors From China Unrest Spook Global Markets

Cryptocurrencies slid Monday amid a bout of investor anxiety in global markets sparked by protests in China against Covid restrictions.

Bitcoin, the largest token, at one point shed 3.2% and was trading at about $16,170 as of 12:40 p.m. in Tokyo. Second-ranked Ether fell about 4%, while the likes of Solana, Avalanche and Dogecoin suffered even sharper losses.

The nerves stoked by China come during a period of vulnerability for crypto markets, which are on edge over the contagion spreading from the fall of Sam Bankman-Fried’s FTX exchange and sister trading house Alameda Research.

Crypto watchers also pointed to worries about wrapped Ether, which is meant to have the same value as Ether while allowing access to more applications.

Some reports suggested the concerns stemmed from joke Twitter posts falsely claiming a break in the expected peg in the value of wrapped Ether and Ether.

Markus Thielen, head of research and strategy at crypto lender Matrixport, said he’s “not too concerned” about wrapped Ether because it’s based on automatically executing software known as smart contracts.

“This will make it unlikely to be actually manipulated as no person, nor a centralized entity, should be able to manipulate the open-source smart contract,” which can also be checked for bugs or flaws, Thielen added.

The drop in crypto assets Monday came amid a slide in Asian stocks and US equity futures. One risk in China is that Beijing’s ongoing policy of Covid-zero mobility curbs is an impediment to stabilizing domestic demand, Katrina Ell, senior economist at Moody’s Analytics Inc., said on Bloomberg Television.

Bitcoin’s Bad Month

Markets may also be fretting that unrest in China will cause further supply chain constraints globally, said Hayden Hughes, chief executive officer of social-trading platform Alpha Impact. Such snarls can make it harder to beat back inflation, leaving interest rates higher.

Bitcoin is down about 21% so far in November, the token’s worst monthly performance since June. This year’s crypto rout has sliced almost 70% off a gauge of the top 100 digital assets.

The collapse of FTX -- which once boasted a $32 billion valuation but tumbled into a bankruptcy in a matter of days this month -- continues to threaten a wider reckoning for the digital-asset sector.

“Elevated contagion risk is being profiled into the cryptocurrency complex,” said John Toro, head of trading at digital-asset exchange Independent Reserve.