The Price Of Bitcoin Has Lost Half Its Value—Again

The cryptocurrency is down for six of the past seven days, retreating nearly 10% on Monday compared to Friday’s level at 5 p.m. Its lowest level since July is $33,046, according to data from CoinDesk. Bitcoin’s all-time high was reached on November 8 at $68,990.90.

The decline should not come as too much of a surprise to crypto enthusiasts. According to Charlie Billello of Compound Capital Advisors, this is the eighth time since bitcoin launched in 2009 that it has fallen by more than 50%, and the third time since 2018. It had fallen by 52% from April to July last year.

The cryptocurrency has been engulfed in a broad market sell-off, killing risky assets, especially technology companies. The driver, analysts say, is the US Federal Reserve and its plan to withdraw stimulus from the economy and raise interest rates. The tech-heavy Nasdaq stock index is down 12% since the start of the year.

“Crypto is a high-growth emerging industry that trades as a risk asset,” said Martha Reyes, head of research at European digital-asset brokerage, Bequent. “It’s quite dramatic this morning and completely driven by the macro environment, including by the Fed.”

According to Ms. Reyes, retail investors also seem to be taking a step back from investing in crypto. Small-sized transfer volumes, a proxy for retail merchant usage, declined by more than 40% between the first and fourth quarters of last year, according to data from blockchain data research firm Glassnode.

This could be because market interest is shifting towards trendy digital assets. Google searches for ‘NFT’, an abbreviation for non-fungible tokens, climbed steadily over the past year and into 2022. Meanwhile, searches for “Bitcoin” fell last June and remained at a depressed level until a surge during last week’s selloff.

Few cryptocurrencies have fallen even further than bitcoin. Ether, the second most popular digital currency, is down 53% from its previous record in November. Solana, the cryptocurrency that gained popularity last year, is down 64% and another meme-based digital currency Shiba Inu is down 75%.

“It makes sense to me to give the broader crypto a tough competition. It is about innovation, which should be related to riskier assets,” said Joel Kruger, currency strategist at exchange LMAX Group. The index is, like, the sum of all projects on the Ethereum blockchain” such as games, NFTs, decentralized finance projects and smart contracts.