Bitcoin plunged sharply on Tuesday, falling over 6% to dip below $100,000 for the first time since June, as broader risk-off sentiment rippled across global financial markets.
Major U.S. stock indexes also slid, with technology and semiconductor stocks particularly hard hit, after Goldman Sachs and Morgan Stanley CEOs warned that equities may be poised for a significant pullback.
The cautious mood drove Treasury yields lower, while the U.S. dollar surged to a four-month high against the euro, putting additional pressure on risk assets, including cryptocurrencies.
Bitcoin’s drop underscores growing investor caution amid tightening monetary conditions and heightened market volatility, prompting some traders to reduce exposure to high-risk assets.
At an investment summit in Hong Kong, the bank CEOs cautioned that U.S. stocks could see a correction of more than 10% over the next two years.
Tech heavyweight Nvidia saw shares decline 4%, while an index of semiconductor stocks also fell by the same margin.
Data analytics company Palantir Technologies (PLTR.O) dropped more than 8% despite posting strong quarterly results and forecasting an above-market fourth-quarter outlook, boosted by rising demand for its AI services.
Investor Michael Burry, famous for his successful bet against the U.S. housing market in 2008, reportedly placed bearish positions on Nvidia and Palantir, according to a regulatory filing on Monday.
The broader market reflected growing caution: the S&P 500 fell 1.17% to 6,771.55, the Nasdaq dropped 2.04% to 23,348.64, and the Dow Jones Industrial Average slid 251 points to 47,085.24.
Keith Buchanan, senior portfolio manager at Globalt Investments, said, “The market has been moving higher based on earnings, but it seems positioned for a risk-off pullback at the slightest disappointment.”
MSCI’s gauge of stocks across the globe fell 11.51 points, or 1.14%, to 996.34.
The pan-European STOXX 600 index fell 0.3%.
Optimism about AI deals has been helping stocks. On Monday, stocks gained following Amazon.com’s $38 billion cloud services deal with ChatGPT creator OpenAI.
The US dollar was underpinned in part by reduced bets for near-term Federal Reserve easing, with divisions within the Fed raising doubt about the prospect of another rate cut this year.
The Fed lowered rates last week, but Chair Jerome Powell said a December rate cut was not a foregone conclusion.
Traders are betting on a 65% chance of a rate cut in December, compared with 94% a week earlier, CME FedWatch showed.
The euro EUR= fell for the fifth straight session and was down 0.3% at $1.148, its weakest since August 1. Against the yen, the dollar was 0.5% lower, though the Japanese currency remained near a recent 8-1/2-month low.
Sterling tumbled after the UK finance minister pointed to “hard choices” in her upcoming budget. Sterling GBP= weakened 0.72% to $1.3044.
US Treasury yields declined amid a broader risk-off tone in financial markets.
Because of the government shutdown, a closely watched monthly jobs report from the Bureau of Labor Statistics will not be available on Friday, as previously scheduled.
The yield on benchmark US 10-year notes US10YT=RR fell 2 basis points to 4.087%, from 4.107% late on Monday.
US crude CLc1 fell 49 cents to settle at $60.56 a barrel, and Brent LCOc1 fell 45 cents to settle at $64.44. A stronger dollar weighed.
