A huge drop and snap back in cryptocurrency prices this week rippled into traditional asset classes, potentially offering a taste of what could happen in the event of a more severe shake-up.
Some government bonds gained in price on Wednesday, while futures on the US benchmark S&P 500 equities index dipped and oil also pulled back after the price of bitcoin plunged 30 per cent on signs that China was preparing a crackdown on digital tokens. The Japanese yen — a currency often in demand in times of stress — also popped higher.
Hours later, bitcoin rebounded sharply. But it was unusual for the ructions to catch the attention of mainstream market participants.
“The catalyst for these moves appears to have been a sudden rout in bitcoin,” wrote Richard McGuire and Lyn Graham-Taylor, rates analysts at Rabobank, in their regular note the following day. “So here we are. Even as august an organ as the Rabo Rates Daily…