Bitcoin extended its tumble on Monday, and has now fallen by half from its record high.
The cryptocurrency had declined for six out of the last seven days, retreating 10% on Monday morning from its level at 5 p.m. on Friday. It fell below $33,000, its lowest level since July, before rebounding in the afternoon, most recently up 2.9% at $35,745, according to data from CoinDesk. Bitcoin’s record high was reached on Nov. 8 at $68,990.90.
The drop shouldn’t come as too much of a surprise to crypto enthusiasts. It is the eighth time since Bitcoin launched in 2009 that it has fallen by more than 50%, and the third time since 2018, according to Charlie Bilello of Compound Capital Advisors. From April through July last year, it fell 52%.
Cryptocurrencies have been swept up in a broad market selloff hitting riskier assets, especially technology companies. The driver, analysts say, is the U.S. Federal Reserve and its plans to pull back stimulus from the economy and raise interest rates. The tech-heavy Nasdaq stock index has declined 12% since the start of the year.
“Crypto is a high-growth nascent industry that trades as a risk asset,” said Martha Reyes, head of research at Bequant, a European digital-assets brokerage. “It’s quite dramatic this morning and completely driven by the macro environment, buffeted about by the Fed.”
Retail investors also appear to be taking a step back from investing in crypto, according to Ms. Reyes. The volume of smaller-size transfers, a proxy for retail trader use, declined by over 40% between the first and fourth quarters last year, according to data from Glassnode, a blockchain data research firm.
This may be because market interest is shifting toward trendier digital assets. Google searches for ‘NFT’, the acronym for nonfungible tokens, climbed steadily all of last year and into 2022. Meanwhile, searches for “bitcoin” fell last June and remained at depressed levels until rising during last week’s selloff.
Some cryptocurrencies have fallen even further than bitcoin. Ether, the second-most popular digital currency, is down 52% from the last record it notched, also in November. Solana, a cryptocurrency that gained popularity last year, has fallen 66% and Shiba Inu, another digital currency based on a meme, declined 78%.
“It makes sense to me for broad crypto to get hit hard. It’s all about innovation, which should correlate with risky assets,” said Joel Kruger, a currency strategist at exchange LMAX Group. “Ether is almost like an index, the sum of all of the projects together on the ethereum blockchain” such as games, NFTs, decentralized finance projects and smart contracts.
The moves are in a sharp contrast to some investors’ and analysts’ expectations. A JPMorgan analyst said in October that bitcoin could eventually reach $146,000.
Write to Anna Hirtenstein at [email protected]
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