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Bitcoin drops to three-week low as global markets turn risk off

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Cryptocurrencies suffered a sharp selloff as global markets retreated on the back of growing uncertainty about the direction of monetary policy.

Bitcoin tumbled as much as 8.3%, reaching the lowest level since late July. The largest digital token pared some of the losses, and was trading down 6% at $21 990 as of 8:25 a.m. in London. Equity markets were down across Europe.

Ether and smaller virtual coins saw sharper declines. Avalanche, Cardano and Solana fell more than 10% at one point.

About $220 million of crypto positions got liquidated in the span of an hour in Friday, with Bitcoin accounting for roughly half of that, according to data from Coinglass.

Crypto’s recovery since June is looking increasingly fragile as traders struggle to get a clear sense of the direction of Federal Reserve monetary policy. Two Fed officials, James Bullard and Esther George, on Thursday gave divergent signals on the size of the next interest-rate hike.

“The recovery trend was looking weak and has done for weeks, but I don’t think that alone explains such a huge move all of a sudden,” said Craig Erlam, senior market analyst at Oanda.

Attention now turns to the Fed’s annual symposium in Jackson Hole, Wyoming next week. There’s already speculation that Fed Chair Jerome Powell may lean against a recent loosening in financial conditions that’s driven financial markets higher in past weeks.

© 2022 Bloomberg

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