As cryptocurrency investors suffer from the sharp sell-off in bitcoin and other digital currenci...
As cryptocurrency investors suffer from the sharp sell-off in bitcoin and other digital currencies, some fear the worst is yet to come.
Bitcoin, the world's largest virtual currency, briefly fell below $33,000 on Monday to its lowest level since July. The $36,000 mark, but still nearly 50% down from November's record high of nearly $69,000.
Meanwhile, since bitcoin's all-time high of over $1 trillion, the overall crypto market has fallen in value as major tokens like ether and Solana followed the #1 digital currency to trade significantly lower.
Ether has more than halved in value since its November peak, while Solana has posted an even steeper drop of 65%. ' a phrase referring to the historic bear markets in the history of the fledgling digital currency market.
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The most recent event occurred in late 2017 and early 2018 when Bitcoin plummeted by as much as 80% from an all-time high. David Marcus, the former head of crypto at Facebook parent Meta, appeared to admit that crypto winter had already set in.
In a tweet on Monday, he said, “In crypto winters, the best entrepreneurs build the best companies. This is the time to come back to solve real problems.
The SandP 500 is down 8% year-to-date, while the Nasdaq Tech Index is down more than 12%. The correlation between Bitcoin and the SandP 500 hit a new all-time high of 0.3 on Monday, according to data from Coin Metrics.
Traders fear that potential rate hikes and aggressive monetary tightening by the Federal Reserve will deplete market liquidity.
Ultra-cheap money and sky-high valuations, particularly in high-growth sectors like technology, benefit from lower interest rates as companies often borrow funds to invest in their businesses.
Down moves in major digital currencies have been a boon for stablecoins, or digital currencies that track the value of sovereign currencies like the US dollar. USD Coin, the second-largest stablecoin, added more than $5 billion in market value on Sunday, according to data from CoinGecko.
Correction?
Vijay Ayyar, vice president of corporate and international development at cryptocurrency exchange Luno, believes the cryptocurrency's recent plunge is more of a "correction" than a sustained downturn.
Bitcoin has typically seen “exploding spikes” before falling 80% or more. he said. This refers to a chart pattern that shows a sharp rise in price and trading volume followed by a sharp fall in price.
Correction area,” Ayyar said. Looking ahead, he says a key level to watch for bitcoin is $30,000. If it closes below that point in about a week, "that would definitely indicate a high probability of a bear market," he said.
A drop of around 80% from Bitcoin's recent peak would suggest a price below $15,000. Ayyar doesn't think that scenario is on the table.
Still, investors are worried about the prospect of more regulatory crackdowns on the crypto industry.
Last week, Russia's central bank proposed to ban the use and mining of cryptocurrencies, mimicking a similar move by neighboring China. And the US government is reportedly preparing to launch a strategy to regulate crypto starting next month.
