● Surging Bond Yields Affecting Bitcoin
● Cascading Liquidation at Crypto Exchange Prompts Refunds
Hello and welcome to another week's edition of Overbit Insights, where we cover the week's top insights. Heading in this week's edition, our first story of the week is Bitcoin and how it's sharp sell-off could be related to increasing bond yields.
This week's 10-year Treasury Yield hit 1.61 per cent, its highest level in a year, and in the process has risen above the 1.5 per cent dividend yield of the S&P 500, alarming investors who have come to believe there is no alternative to stocks. Marc Lichtenfeld, the chief income strategist of the financial newsletter The Oxford Club, stated that "Higher interest rates led to a sell-off in tech stocks and the broad market," The sharp rise in yields also caused money to flee Bitcoin, which fell 14% for the week.
Bitcoin has seen its price rise more than six times over the past year amid the unprecedented amount of fiscal and monetary stimulus pumped into the market to revive the US economy from its COVID-19 recession, the sharpest since the post-World War II period. Jim Bianco, president of Chicago-based Bianco Research, thinks that Cryptocurrencies are "starting to take on the properties of financial assets in that they seem to be impacted by financial market events".
We're beginning to see some of this relationship with institutional stocks, such as MicroStrategy Inc., which has more than 90,500 Bitcoins worth around $4.25 billion at Friday's $47,000 mark, down 41 per cent since peaking on Feb. 9. Meanwhile, the shares of the electric-car manufacturer Tesla Inc. and the payment firm Square Inc., which allocated 8 per cent and 5 per cent of their cash to Bitcoin, respectively, have also seen significant losses recently. These stock drawdowns come during the time of increased corporate American interest in diversifying cash assets into bitcoin, resulting in unwelcome share-price declines for investors in those firms.
To close out today's edition of Overbit Insights, we're taking a look at the Kraken cryptocurrency exchange and how refunds for their traders may be on the way.
It's well known that high volatility is a hallmark of cryptocurrency, something that all traders and investors simply have to deal with, managing their risk accordingly. However, it seems on Feb. 22, this volatility was too much to handle for the Kraken exchange. On this day, Ethereum prices fell to $700, well below the industry index rate. Despite such a considerable divergence in price, Kraken still claims their trading engine did not suffer from any bugs or issues. According to reports, "Kraken investigated the sell-off and found that its trading engine had 'processed orders correctly'".
Nevertheless, the exchange has decided to make good on their customers, offering refunds on anywhere from 5% to 50% on their losses. Kraken CEO Jesse Powell said the business was "coming out of pocket to help some people out for the sake of client retention.", according to The Block's reporting. Although the CEO Powell took to Twitter warning of high-leverage trading, it still seems the business intends to keep their customers satisfied.
As a whole, this story is a sign of the cryptocurrency market's maturation, demonstrating some of the industry's largest names and its solvency to pull off such a move. As always, thanks for reading Overbit Insights and visit Overbit.com for all your trading needs.