Bitcoin fell to its lowest in 16 months on Thursday, leading a rush out of risk assets such as tech stocks, while the collapse of TerraUSD, a so-called stablecoin, underscored the strain on cryptocurrency markets.
The world’s largest cryptocurrency dropped as low as $26,970, to stand at its lowest since Dec. 28, 2020. In the last eight sessions, it has lost a third of its value, or $13,000.
Bitcoin surged in 2021 to reach its all-time high of $69,000 that November.
Since the start of this year, bitcoin’s price movement has closely mirrored that of the Nasdaq, a bench mark that’s heavily weighted toward technology stocks, according to an analysis by the data firm Arcane Research.
That means that as bitcoin’s price dropped more than 25% over the past month, to under $30,000 on Wednesday — less than half its November peak — the plunge came in near lock step with a broader collapse of tech stocks as investors grappled with higher interest rates and the war in Ukraine.
The growing correlation helps explain why those who bought the cryptocurrency last year, hoping it would grow more valuable, have seen their investment crater. And while bitcoin has always been volatile, its increasing resemblance to risky tech stocks starkly shows that its promise as a transformative asset remains unfulfilled.
The unstable algorithms of ‘stablecoins’ are hurting the crypto market sentiments, while the US dollar-pegged tokens are getting ‘depegged’ and dragging the market lower.
Other than this, rising inflation numbers across the globe are worrying investors over the looming economic slowdown. Russia’s unprovoked attack on Ukraine has just added to the woes.
None of the tokens was trading in the green during the early hours on Thursday. Bitcoin plunged 8 per cent whereas Ethereum dropped 13 per cent. And the pain in altcoins was more intense.
The global cryptocurrency market cap was trading sharply lower at the $1.25 trillion mark, down 13 per cent in the last 24 hours. However, the total cryptocurrency trading volume rose about 40 per cent to $218.14 billion.
As per experts, Bitoin’s recent decline mirrors tumbles in tech stocks, as the Nasdaq has lost 6.4 per cent this week. Bitcoin price today fell to its 16 month low, and was standing at $27,411.11 at the time of writing this article, which was down by 9.89 per cent over the last 24 hours. Meanwhile, Ether price today, too, crashed to $1,797.26 while writing this article. This was down by a whopping 22.37 per cent over the last 24 hours.
Although, cryptocurrencies are seen as a resort to hedge funds against inflation which has been soaring stubbornly in the past few months pushing major central banks to tighten monetary policy stance and hike key rates.
In a raging inflation case, cryptocurrencies especially Bitcoin could have a possible moment of glory, however, concerns about economic growth from the shocks of the pandemic and a possible scenario of recession going ahead – have led to vulnerability and panic selling in this market.
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