Bitcoin rout

Cryptocurrency prices slumped as a broad selloff sparked by worries about contagion from China Evergrande Group swept through global markets.

Bitcoin dropped 7.3% to $44,127 as of 7:33 a.m. in New York, reaching the lowest level in a week. Other digital assets also retreated, with Bitcoin Cash, EOS and Ether all declining.

The losses mirrored the action in the broader market as investors weighed the risks coming from Evergrande’s debt woes and this week’s Federal Reserve meeting.

U.S. equity futures pointed to losses at the open and the Stoxx Europe 600 index dropped as much as 2%, on track for the biggest decline since July.

“Some have attributed the sudden dip to the currently ongoing Evergrande situation in China which has already caused turmoil in traditional markets,” wrote Jonas Luethy, a sales trader at GlobalBlock, the U.K.-based digital asset broker.

“Analysts have suggested a choppy week is ahead, with a potential pullback to as low as $41,000.”

El Salvador’s President Nayib Bukele said the country had “bought the dip,” in Bitcoin, adding 150 tokens to raise its total holdings to 700 — about $32 million based on current pricing.

The nation recently adopted Bitcoin as legal tender in a controversial move that met with technical glitches and protests.

El Salvador’s enthusiastic adoption of Bitcoin is one of the reasons why prices have been trending higher and recently hit a four-month high. Still, the market has a way to go before recovering losses since a selloff in May.

The global stock rout sparked by investor angst over China’s real-estate sector and Federal Reserve tapering worsened on Monday, with U.S. stocks falling more than 1% and European equities tumbling the most in almost a year.

The S&P 500 fell the most on an intraday basis since July, a test for the buy-the-dip mentality as the gauge jabs at its 50-day moving average. Treasuries gained along with the dollar before Wednesday’s Fed meeting, where policy makers are expected to start laying the groundwork for paring stimulus.

The Stoxx Europe 600 index dropped more than 2% to a two-month low, on track for the biggest decline since October 2020. Raw materials led the broad-based retreat as iron ore extended a slump below $100 a ton and base metals declined after China stepped up restrictions on industrial activity. Germany’s DAX underperformed as a rebalancing takes effect.

Hong Kong shares slumped amid the biggest selloff in property stocks in more than a year as traders tracked the risk of contagion from the debt crisis at developer China Evergrande Group, which is fueling new fears about China’s growth path.

Aside from Evergrande and the prospect of reduced Fed stimulus, financial markets also face risks from uncertainty over the outlook for President Joe Biden’s $4 trillion economic agenda as well as the need to raise or suspend the U.S. debt ceiling. Investors were already fretting over a slowing global recovery from the pandemic and inflation stoked by commodity prices.

“The edges of the bullish narrative cover are being pulled and the darker underlying reality is coming to the fore,” said Sebastien Galy, a senior macro strategist at Nordea Investment Funds SA. “It is taking the market more time to price in these shocks than I had expected, and the market is far more realistic as the buy-on-dip mentality fades with the fear of inflation.”

Meanwhile, emerging-market stocks headed for their biggest drop in a month, while Russia’s ruble and Chile’s peso led developing-nation currency declines. Bitcoin fell below $43,000.

WTI crude oil extended a drop toward $70 a barrel.

Treasury Secretary Janet Yellen said the U.S. government will run out of money to pay its bills sometime in October without action on the debt ceiling, warning of “economic catastrophe” unless lawmakers take the necessary steps.

Now read: Cryptocurrencies entice US state and city governments — S&P

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Bitcoin rout