The recent dynamism in the bond market has been beating down the stock market over the past week. And now, the cryptocurrency market has begun to move in tandem with the stock prices.
A Weekend of Worry for Stocks and Crypto
The exodus of investors from technology stocks has also influenced a significant sell-off in the cryptocurrency market, with Bitcoin (BTC-USD) nosediving to its lowest dollar value since August last year, on Friday.
The weekend witnessed continued volatility. The world’s highest-value cryptocurrency —Bitcoin — spiraled below $35,000 on Saturday. However, the loss was marginally recovered on Sunday afternoon as the cryptocurrency inched back up just above that mark. These dynamics led Bitcoin to shed almost half of its record price.
Importantly, tension has been building up in major markets of the world ahead of the U.S. Federal Reserve meeting scheduled for Tuesday, January 25. The following day, Fed Chairman Jerome Powell is expected to brief the media about the next step in the monetary policy to curb the rising inflation.
Anxious investors preferred to take some of their investments out of the markets, probably waiting for a better entry point once the interest rate matter is clearer. The cryptocurrency market and the tech-heavy Nasdaq Composite and Nasdaq 100 indexes were hit the hardest by this anticipation, it seems.
The S&P 500 (SPX) fell 1.89%, and Dow Jones (DJIA) dropped 1.3% at market close on Friday. Meanwhile, the Nasdaq 100 (NDX) closed 2.72% lower, led by a 23.4% drop in Netflix (NFLX) shares after a dismal Q4 commentary.
Russia-Ukraine Conflict Looms Large
The anticipation about the U.S. interest rate hike was met by a negative impact from the growing geo-political tensions between Russia and Ukraine. Both the issues led the Asian and European markets to edge lower today, January 24.
On Monday morning, South Korea’s KOSPI index dropped 1.78%, and Japan’s Nikkei 225 declined 0.55%. Meanwhile, Hong Kong’s Hang Seng Index dipped 1.2%. Moreover, at their respective opens, the U.K.’s FTSE index opened 15 points lower, Germany’s DAX index was pushed down by 35 points, France’s CAC index was 40 down 17 points and Italy’s FTSE MIB index fell 36 points.
What Can a War Mean for the U.S.?
It looks like the U.S. market is also likely to feel the heat of the boiling tensions between Russia and Ukraine today, after the U.S. State Department on Sunday asked American citizens in Ukraine to leave the country urgently.
Earlier this month, the Biden administration was working on some strict financial, technology, and military sanctions against Russia, which it said would be implemented in the event of an invasion into Ukraine. This move is intended to crack down harder down on Russia so as to discourage the invasion, after Obama-era sanctions failed to pull Russia out of Crimea, despite damaging the Russian economy and currency.
Invariably, the sanctions, if implemented, are bound to scare investors off the stock market. Nonetheless, the U.S. bond market may be in a position to benefit right now.
With inflation hovering around multi-year highs and the anticipation of an impending interest rate hike keeping the bond markets volatile, a Russia-Ukraine conflict may drive more investors towards bonds. This is because bonds are one of the safest investment instruments that can buffer an investor against any untoward incident affecting the equity market.
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