LIVE MARKETS-Why bitcoin's latest rout feels different

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

WHY BITCOIN’S LATEST ROUT FEELS DIFFERENT

Bitcoin and Ether are heading into another month of losses and the debate is heating up over what lies ahead.

The world's most valuable cryptocurrency BTC= has fallen nearly 40% from its record high in early October and more recent losses had investors liquidate $2.56 billion according to CoinGlass earlier this week.

Similarly, ether ETH= is heading for its sixth-straight month in losses and has lost half its value since its all-time high in August.

Andrew O'Neill, analytical lead on Digital Assets at S&P Global attributes recent losses to the unwind of leverage in the bitcoin perpetual futures market, along with liquidity constraints driven by uncertainties over tariffs and Japanese interest rates.

Bitcoin's properties, at one time, had some analysts liken it to gold. But, 'Big Short' Michael Burry says it's got more pain than gain ahead.

In a note earlier this week, he said bitcoin is emerging more into a speculative trade, rather than an asset that investors consider seriously, and it's that speculation that sparked a selloff in precious metals over the past few days.

According to Burry, bitcoin's declines triggered a selloff in tokenized silver and gold futures on crypto exchanges that are traded using crypto assets as collateral, but not backed by the precious metal. This consequently sent traditional derivatives into a wider spiral.

He says much of this free-fall also has to do with weakening price floors which included its popular use for untraceable transactions and institutional buying.

If losses deepen, bankruptcies are on the horizon, Burry says, adding that the recent Metropolitan Capital Bank & Trust's shut-down in Chicago could be related to such forced collateral liquidations.

Bitcoin breaking at $60,000 would mean the largest hoarder of the cryptocurrency, Strategy MSTR.O, would face an existential crisis and at $50,000, miners would go bankrupt and be forced to sell their BTC reserves, Burry said.

The dwindling value of bitcoin holdings had investors on edge about Strategy's future in major indexes.

But S&P Global says that the software-turned crypto treasury firm has available liquidity for the short term, adding that regulatory clarity on blockchain technology could be a favorable shift for the industry overall.

(Johann M Cherian)

*****

EARLIER ON LIVE MARKETS:

S&P 500: BREAKOUT OR FAKEOUT? CLICK HERE

UBS SEES 10-20% UPSIDE FOR EUROPEAN RENEWABLES CLICK HERE

EU CARMAKERS FACE 'SCARY' CHINA EXPORT ACCELERATION CLICK HERE

TELECOMS SHINE AS SOFTWARE STRUGGLES, FTSE AT NEW RECORD CLICK HERE

EUROPE BEFORE THE BELL: SOFTWARE WATCHED, BIG HIT FOR NOVO CLICK HERE

EURO ZONE FACES INFLATION HURDLE BEFORE ECB CLICK HERE

( )