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Bitcoin takes cue from stock market, extends decline

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Digital currencies traded lower Friday in New York, unable to capitalize on solid gains earlier in the week.

The price of the No. 1 digital currency, bitcoin

BTCUSD, +2.67%

 was down 2.4% late Friday, trading at $6,610.67, slightly off its overnight low of $6,513.10.

Digital currencies followed equities, which posted significant losses; the Dow Jones Industrial Average

DJIA, -2.34%

 slumped more than 700 points at its session low.

The slide in bitcoin, which makes up 45.2% of the total market cap of cryptocurrencies, has pushed the overall value of the market below $250 billion, just about $7 billion away from making a five-month low (see chart below from CoinMarketCap.com):

CoinMarketCap

Coinbase in talks with regulators

Late Friday, The Wall Street Journal reported that U.S. digital currency exchange Coinbase is in talks with regulatory bodies about registering as a licensed brokerage firm. The move would mark a significant step forward for digital currency exchanges that continue to be tagged with the reputation of where the day traders seeking extreme volatility come to play.

Coinbase’s crypto trading arm GDAX is the ninth-largest exchange by daily 24-hour volume, according to Coinmarketcap.

MarketWatch reached out to Coinbase, which had no comment.

Correlation or not?

As global equity markets continue to be whipped around, strategists continue to debate whether there is any correlation between stocks and virtual currencies. They are meant to be a noncorrelated asset, meaning they don’t move in lockstep with any other financial asset.

Steve Barrow, currency and fixed-income analyst at Standard Bank, in a Friday note said unconventional monetary policy after the financial crisis that pushed interest rates to record lows have seen the two move more in lockstep.

“There’s a second, more cerebral explanation. This is that bitcoin and cryptocurrencies are not just another speculative play thing; they reflect a backlash against the debasing of money that’s been undertaken by fiat-based monetary authorities in the large nations/regions such as the U.S., Japan, U.K. and eurozone,” Barrow wrote.

He said as rates normalize, the decline in digital currency prices could accelerate.

“In this sense we might just see the bitcoin implosion as a reflection of the impending decline in global liquidity that kicked off with U.S. rate hikes and balance sheet normalization.”

Read:A ‘seismic shift’ is taking place in the cryptocurrency sector, analyst says

Other markets

That said, bitcoin saw upbeat trading on Friday compared with other coins. Ether, which runs on the Ethereum network, lost 3.5%, trading at $370.14 late Friday. Bitcoin Cash was the worst performer, down 6.1% at $607.33, while Litecoin was off 4.5% at $114.03 and Ripple’s XRP coin was back below 50 cents, last trading at 47 cents, down 4.9%.

Futures followed the spot market lower. The Cboe’s April contract

XBTJ8, -2.66%

closed down 2.5% at $6,605 and the CME Group Inc. April contract

BTCJ8, -2.51%

finished the week at $6,630. down 1.9%.

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