Cryptocurrencies are getting smoked as investors move to 'risk off'

LONDON — Cryptocurrencies are falling just before lunchtime on Wednesday.

Major digital currencies began the day in London on the back-foot, with cryptos down between 1% and 3%. The slump has worsened as the morning has progressed.

Here's how the scoreboard looks at 11.10 a.m. GMT (6.10 a.m.) ET:

The sell-off appears to have gathered pace over the last month, with the entire cryptocurrency market declining by almost $7 billion in around half an hour.

Mati Greenspan, an analyst with trading platform eToro, told Business Insider: "This move is actually quite correlated with the moves in US stocks."

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US stock market futures dived on Wednesday morning after China singled retaliatory tariffs on American-made goods. Greenspan pointed to a spike in US dollar-to-crypto trading volumes this morning, saying it appears American investors are dumping crypto as well as stocks.

Greenspan said stocks and crypto are linked by the fact that they are both risk assets and signs of a looming trade war are pushing investors to move to "risk off" investment stances.

Jeffrey Gundlach of DoubleLine Capital said on Tuesday that bitcoin is proving to be a new stock market indicator. This is a relatively new phenomenon.

Crypto proponents were touting the asset class as a hedging tool as recently as late last year, arguing that the digital assets are largely uncorrelated to other markets. The growing link between stocks and crypto is likely a sign of the increasing sophistication and maturity of crypto markets and their participants.

After booming at the end of 2017, cryptocurrencies have had a torrid start to the year. Bitcoin had its second-worst quarter on record at the start of 2018, declining by over 50% against the dollar.

Charles Hayter, the CEO and founder of CryptoCompare.com, told Business Insider: "Last year was about testing new highs and this year has been about testing new lows so far as the exuberance has been wiped out of the system."

Hayter said sentiment has been hurt by US regulator the SEC issuing a wave of subpoenas and platforms such as Google, Facebook, and Twitter all moving to ban cryptocurrency adverts.

"The walls going up with major advertisers on the back of misleading copy have also led to less publicity for the ecosystem," Hayter said. "Coupled with that [there are] regulatory moves by governments [that] are one thing one minute and another the next — so uncertainty means a lack of clarity for business."