Bitcoin’s Plunge Sparks Wider Selloff

Bitcoin plunged to its lowest level since February on Wednesday, hitting a low of $30,200, down by more than half from an all-time high of $64,829 it reached just last month.

Ether, the second most valuable cryptocurrency, was down 21% as well on Wednesday.

The fallout was hitting stocks that have ridden the crypto boom. Square (ticker: SQ) dropped 4% and PayPal Holdings (PYPL) was off 1.5%. Companies with even more of their business models tied to the price of cryptocurrencies dropped even more precipitously, with crypto exchange Coinbase Global (COIN) falling 8% and business software firm MicroStrategy (MSTR), which has bought billions worth of Bitcoin, down 11%.

MicroStrategy’s CEO MIchael Saylor, among the most important evangelists for crypto had a short message on Twitter: “I’m not selling.”

Some crypto users couldn’t sell even if they wanted to. Coinbase users complained about trouble accessing the app. The company said “some features may not be functioning completely normal” and it is investigating.

Bitcoin had recovered to about $36,000 by 10:45 a.m. Eastern time, still down 19% in the past 24 hours. But even getting a definitive price was tricky. CoinDesk, among the most popular sites for crypto information, was down for part of the morning, and was showing different prices than coinmarketcap.com, another hub for data, and Coinbase. At about the same time, Coinbase was showing $36,998, while coinmarketcap showed $36,429—the kind of spread that used to happen in crypto but that had diminished in the past couple of years as the market became more liquid.

All of the gains Bitcoin accrued since Tesla (TSLA) got involved with the cryptocurrency have now been erased. And as with many things in crypto, it’s difficult to pinpoint the catalyst for the selloff.

Matt Hougan, chief investment officer of crypto fund provider Bitwise Asset Management, told Barron’s that the drop was caused by “short-term forced and panicked selling by retail investors who entered the market in the past year, spooked by a mix of bad news and misinformation, and turbocharged by the procyclical leverage that’s an inherent feature of the crypto market.”

Looking at patterns on the Bitcoin blockchain itself, he said he sees funds moving from overseas retail investors to institutions in the United States, “which is a good thing for the long-term. But in the short-term, volatility is a part of the market.”

The market has been dropping since Elon Musk began questioning Bitcoin’s negative environmental impacts about a week ago. One more recent catalyst may have been China’s decision to reiterate its ban on financial institutions facilitating crypto transactions.

In the crypto market, momentum can turn quickly and selloffs can accelerate as people try to lock in gains made in the latest bull market. Anyone who bought cryptocurrencies in 2020 is still showing a large paper profit, but maybe getting anxious that those gains won’t hold for long.

This “no doubt this will scare investors just as all pullbacks in all markets scare investors” Jim Paulsen, chief investment strategist at The Leuthold Group, wrote in an email to Barron’s. Paulsen is a more traditional investor who has warmed to Bitcoin in the past year. The selloff isn’t shaking his interest in crypto — he still thinks it’s worth allocating 1% or 2% of a portfolio into it. And he likes that the volatility makes it possible to rebalance frequently when prices go up and down.

One thing Paulsen is watching for is whether the selloff bleeds into the larger market. The S&P 500 was down 1.3% on Wednesday morning. “Note that the other 3 times crypto did this, the stock market suffered a correction or a bear market,” he wrote. “So part of the crypto story may depend on what the stock market does from here? Does it recover soon or is this a full-blown, longer-lasting correction for stocks?”

Saylor and other Bitcoin bulls have said that Bitcoin is an effective hedge against inflation, because the number of Bitcoins is capped at 21 million, theoretically making it impervious to the “money-printing” common with fiat currencies. Prominent hedge-fund managers like Stanley Druckenmiller have bought Bitcoin under that premise, and some analysts have found that Bitcoin has been stealing gold’s thunder.

But as inflation fears grow in the United States, there is evidence that institutional investors are returning to their familiar inflation hedge.

Investors have been pulling money out of Bitcoin futures and funds and putting more of it into gold, according to a new analysis by J.P. Morgan strategist Nikolaos Panigirtzoglou. That’s a shift from the prior two quarters, he wrote. On Wednesday, the spot price of gold was up 0.8% to $1,883.20 per ounce.

A new investment fund targeting celebrity-founded consumer brands has secured US$40 million in commitments and is rapidly approaching its US$50 million fundraising target, signalling growing investor appetite for alternative opportunities beyond traditional asset classes.

The Global Talent Fund, which has a maximum raise of US$100 million, focuses on building and investing in consumer businesses alongside celebrities, athletes, and influential personalities who play an active role as co-founders rather than simply endorsing products.

The strategy is based on the belief that changes in consumer behaviour, particularly the rise of social media and digital engagement, have fundamentally altered how brands are built and scaled.

GTF founding partner Jeremy Hunt, who is helping lead the fund’s strategy, said consumers increasingly feel connected to personalities they follow online and are more willing to support products developed by those individuals.

“Consumers are searching for content to engage with, and when a celebrity they like or follow takes them on the journey of creating a product or brand, they genuinely feel part of that process,” he said.

The fund is targeting high-growth consumer sectors including wellness, hydration, beauty and recovery, areas Hunt believes continue to benefit from strong global demand and ongoing innovation.

Rather than backing celebrity endorsement deals, the fund is seeking businesses where talent is deeply involved in product development, brand creation and long-term growth.

According to Hunt, authenticity remains one of the biggest differentiators between successful celebrity-backed brands and those that fail.

“The consumer can see clearly if someone is simply being paid to promote a product,” he said. “The winners are typically the brands where the celebrity has genuinely helped build the business from the ground up.”

The model has attracted support from several prominent Australian investors and business families, reflecting broader interest in alternative investments with global growth potential.

Hunt said consumer brands offered a level of tangibility that many investors found appealing.

“Consumer brands are what we touch, feel, smell and taste every day,” he said. “Our investors understand the growth potential in the model, but they also want to be part of the journey.”

The fund’s rapid progress towards its fundraising target comes amid growing recognition that celebrity influence, when combined with strong commercial execution and scalable business models, can create significant enterprise value.

With several high-profile celebrity-founded businesses generating billion-dollar exits in recent years, supporters of the strategy believe the opportunity remains in its early stages.

Bitcoin’s Plunge Sparks Wider Selloff

What to know about the fallout.

With US$40 million already committed, the Global Talent Fund is attracting investor attention with a strategy focused on building globally scalable consumer brands alongside high-profile talent.