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Crypto winter? Investors fear bitcoin has further to drop

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Two commemorative Bitcoins are pictured in front a Tesla car, cold weather Jan. 7, 2022.

Artur Widak | NurPhoto via Getty Images

Cryptocurrency investors are reeling from the sharp sell-offIn bitcoinSome fear that the worst may yet come to digital currencies and others.

The world’s most popular virtual currency is Bitcoin briefly plunged below $33,000Monday was the lowest day since July. While it is now above $36,000 but still below the record of $69,000, November’s peak was almost half-way.

Since bitcoin’s peak, more than $1 trillion has been lost in the crypto market. The No. 1 token, ether, followed closely. The No. 1 digital currency that trades sharply lower. EtherThe value of the company has more than doubled since November when it reached its peak. solanaIt has seen a steeper drop, dropping 65%

Some crypto investors are now talking up the possibility of “crypto winter”, a term that refers to historical bear markets within the digital currency market’s early history. This was the most recent instance of bitcoin falling as low as 80% since its highs in 2017 and 2018.

David Marcus (ex-head of cryptocurrency at Meta), appeared to acknowledge that a crypto winter is already upon us. On Monday, Marcus tweeted: “It’s in crypto winters when the best entrepreneurs make better companies. It’s time to start focusing on real problems and not just pumping tokens.

Nadya Ivanova is chief operating officer of 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.” She believes that this might be a good thing.

“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 and other digital assets. Ivanova stated that the cooling-off period may actually offer an opportunity for the market to build its fundamentals,” she said on CNBC’s Squawk Box Europe.

Crypto’s popularity has coincided with an increase in a slide in global stocks. Experts agree that the digital asset market is becoming increasingly intertwined due to large institutional investments.

The S&P 500Since the beginning of the year, the stock market has dropped 8%. However, the tech-heavy sectors have risen by 9% NasdaqIndex is now down by more than 12% The correlation between bitcoin and the S&P 500 hit a fresh all-time high of 0.3 on Monday, according to Coin Metrics data.

Fear for traders potential interest rate hikesThe Federal Reserve’s aggressive tightening of the monetary policy will drive liquidity out of the markets. 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.

Ivanova stated that bitcoin’s decline was due to “the rout” and the withdrawal of risky assets.

Stablecoins are digital currencies that measure the value of sovereign currency like the U.S. dollars and have seen a rise in their prices. The market capitalization of USD Coin (the second largest stablecoin) has increased by more than $5 billion since Sunday according to CoinGecko data.

Correction?

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