Recently, there has only been one constant for Bitcoin: decline after decline after decline.
As the Federal Reserve prepares to take away the support from the market, riskier investments have fallen throughout the world. On Friday, bitcoin dropped more than 12%, sinking below $36,000 for the first time since July. Since its peak in November, it has lost more than 45 percent of its value. Other digital currencies have also taken a hit, with Ether and meme coins seeing similar drops.
Bitcoin’s decline has taken off more than $600 billion in market value since November’s mark, and the overall crypto market has lost more than $1 trillion. While there have been much larger percentage drops in both Bitcoin and the overall market, according to Bespoke Investment Group, this is the second-largest dollar decline in both.
“It gives an idea of the scale of value destruction that percentage declines can mask,” Bespoke analysts wrote.
“Crypto is, of course, vulnerable to these sorts of selloffs given its naturally higher volatility historically, but given how large market caps have gotten, the volatility is worth thinking about both in raw dollar terms as well as in percentage terms.”
With the Fed’s objectives shaking both cryptocurrencies and stocks, a predominant narrative in the digital-asset world has emerged: cryptos have twisted and turned in almost the same way that equities have.
“Crypto is reacting to the same kind of dynamics that are weighing on risk assets globally,” said Stephane Ouellette, chief executive, and co-founder of institutional crypto-platform FRNT Financial.
“Unfortunately for some of the mature projects like BTC, there is so much cross-correlation within the crypto asset class it’s almost a certainty that it falls, at least temporarily in a broader alt-coin valuation contraction.”
According to reports, crypto-related stocks also fell on Friday, with Coinbase Global Inc. dropping over 16 percent at one point and sliding to its lowest level since its public debut in 2021.
Furthermore, some analysts believe that the current unfavorable crypto price trend will persist in the short term, even though no particularly startling news has frightened Bitcoin investors and prompted this latest dip.
However, others claim to have spotted a pattern similar to what is seen in September and October 2021, when the price of Bitcoin dropped to $41,300 per coin before skyrocketing to a new all-time high.
Whether or not these scenarios play out, cryptocurrency and Bitcoin investors may expect high volatility and more drops in the coming weeks.