[Bitcoin Now] US Stock Market Drops, Bitcoin Falls to $29,000 Range... Investor Sentiment is 'Fear'

[Image source=Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] As major indices on the U.S. New York Stock Exchange closed lower, the price of the representative cryptocurrency Bitcoin plunged sharply.

According to the global cryptocurrency market tracking site CoinMarketCap, as of 1:56 PM on the 4th, the price of Bitcoin was $29,675 (approximately 37.15 million KRW), down 2.63% from the previous day. The day before, it showed an upward trend, reaching the $30,000 range, but on this day it fell to the $29,000 range.

Bitcoin prices declined following the drop in the U.S. stock market. On the 3rd (local time), the Nasdaq index, which is tech-stock focused, closed down 304.16 points (2.47%) at 12,012.73. The Dow Jones Industrial Average fell 348.58 points (1.05%) to 32,899.70, and the large-cap S&P 500 index dropped 68.28 points (1.63%) to 4,108.54. The U.S. Department of Labor announced that nonfarm payrolls increased by 390,000 in May, and despite concerns about economic slowdown, the strong employment market heightened caution about tightening monetary policy.

Bitcoin prices and the U.S. stock market showed a synchronization phenomenon. However, since the recent Luna incident, a decoupling phenomenon has also appeared, where Bitcoin prices fall when the U.S. stock market rises, and Bitcoin prices rise when stocks weaken. Previously, when the price of TerraUSD (UST), a stablecoin designed to be pegged to 1 USD, plummeted, the sister coin Luna also experienced a crash. As a result, not only the market-leading Bitcoin but also altcoin prices fell sharply.

Experts explain that the decoupling is a temporary phenomenon. MarketWatch stated that the collapse of UST shook confidence in digital assets, causing some tech stock investors who traded cryptocurrencies as speculative assets to stop their activities. Mark Connors, a researcher at cryptocurrency asset management firm 3iQ, analyzed that the decline in Bitcoin volatility is the cause of the decoupling. Bird White, co-founder and Chief Product Officer of cryptocurrency exchange Tessen, said, "Traditional investors who invest in tech stocks are worried because they can make bad bets and their investment amounts can go to zero."

Edward Moya, senior market analyst at global investment firm OANDA, said, "Because economic uncertainty continues to suppress investors' risk appetite, cryptocurrencies and stock prices can maintain a high correlation during the Federal Reserve's interest rate hike cycle."

Meanwhile, the Digital Asset Fear & Greed Index by Dunamu, which operates the domestic cryptocurrency exchange Upbit, recorded 32.92 on this day, indicating a 'Fear' stage. Compared to 31.99 (Fear) the previous day, it rose by 0.93. Dunamu's Digital Asset Fear & Greed Index is divided into stages of 'Extreme Fear (0?20)', 'Fear (20?40)', 'Neutral (40?60)', 'Greed (60?80)', and 'Extreme Greed (80?100)'. The greed direction indicates increased interest in buying by market participants, whereas moving toward fear indicates a fear of asset decline, leading to market exits and a chain reaction of price drops.