The cryptocurrency world has experienced its biggest one-day plunge in months. Bitcoin, the most popular cryptocurrency, is down 21 percent over the last 24 hours. Earlier today, Bitcoin fell below $6,000 for the first time since May 2019.
Ether, the currency of the Ethereum network, is down a whopping 27 percent. Lesser-known cryptocurrencies have seen similarly large losses.
There’s no obvious cryptocurrency-specific reason for the crash. Instead, it seems to be part of the broader coronavirus-related selloff that has rocked stock markets around the world.
As of publication time, the S&P 500 is down more than 6 percent from yesterday’s closing price and almost 25 percent from its mid-February peak. Bitcoin itself has fallen from a mid-February peak near $10,500 to its current value just above $6,000—a decline of 42 percent.
Investors have been unloading volatile assets like stocks and cryptocurrencies and buying government bonds. This week the yield on the 30-year US Treasury bond briefly slipped below 1 percent for the first time in history. This was a sign of unprecedented investor demand for US government debt: a bond’s yield is an inverse function of its price.
Investors are worried that in the coming weeks, coronavirus concerns will cause consumers to drastically cut back spending at bars and restaurants, hotels, airlines, entertainment venues, and so forth. That short-term spending slow-down, in turn, could create ripple effects that reduce spending in other sectors of the economy. This could be a vicious cycle that tips the entire US economy into a 2008-style recession.
The Federal Reserve acted decisively to address the issue last week with an emergency cut to interest rates. It is widely expected to cut interest rates again at its regularly scheduled meeting next week.
But other parts of government have been slower to act. Congress and the White House have considered measures like paid sick leave, a payroll tax holiday, or just sending out checks to every American, but progress on these measures has been slow.