The entire crypto market has shed more than $1 trillion in value since bitcoin’s all-time high, as top tokens such as ether and solana followed the No. 1 digital currency sharply lower.
As cryptocurrency investors reel 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 plunged below $33,000 Monday to its lowest level since July. It’s since recovered back above the $36,000 mark, but is still down almost 50 percent from a record high of nearly $69,000 in November.
Meanwhile, the entire crypto market has shed more than $1 trillion in value since bitcoin’s all-time high, as top tokens such as ether and solana followed the No. 1 digital currency to trade sharply lower. Ether has more than halved in value since reaching its peak in November, while solana has suffered an even steeper decline, falling 65 percent.
That’s got some crypto investors talking about the possibility of a “crypto winter,” a phrase referring to historic bear markets in the young digital currency market’s history. The most recent such occurrence happened in late 2017 and early 2018, when bitcoin crashed as much as 80 percent from all-time highs.
David Marcus, the former head of crypto at Facebook-parent Meta, appeared to admit a crypto winter has already arrived. In a tweet Monday, he said: “It’s during crypto winters that the best entrepreneurs build the better companies. This is the time again to focus on solving real problems vs. pumping tokens.”
Nadya Ivanova, chief operating officer at the BNP Paribas-affiliated tech research firm L’Atelier, said she’s not convinced a crypto winter has arrived yet — but the market is “now in a cooling off period.” That might not be so bad, she says.
“Over the last year — especially with all the hype in this market — a lot of developers seem to have been distracted by the easy gains from speculation in NFTs (non-fungible tokens) and other digital assets. A cooling off period might actually be an opportunity to start building the fundamentals of the market,” Ivanova told CNBC’s “Squawk Box Europe.”
Crypto’s rout has come in tandem with a slide in global stocks. Experts say that involvement from large institutional funds has meant digital assets are becoming more intertwined with traditional markets.
The S&P 500 has fallen 8 percent since the start of the year, while the tech-heavy Nasdaq index is down over 12 percent. And the correlation between bitcoin’s performance and that of the S&P 500 has been on the rise lately.
Traders fear potential interest rate hikes and aggressive monetary tightening from the Federal Reserve will drain liquidity from the market. The U.S. central bank is considering making such moves in response to surging inflation, and some analysts say it could result in the end of the era of ultra-cheap money and sky-high valuations — especially in high-growth sectors like tech, which benefits from lower rates since companies often borrow funds to invest in their business.
NBCNews
