20th June 2022 - 3 min read
Over the weekend, Bitcoin tumbled below the US$20,000 mark for the first time since December 2020, extending a streak of dips that began since May 2022. This is indicative of deepening stress within the crypto market, amidst the Federal Reserve’s decision to tighten its monetary policy and other factors.
On Saturday, Bitcoin sank all the way to US$18,740 (approximately RM82,475) – even dipping to as low as US$17,084 (approximately RM75,187) at one point – before vaulting back to above US$20,000 on Sunday. Since then, the largest crypto token has been struggling to hold above the US$20,000 mark, and at the time of writing, it is trading at US$20,590 (about RM90,999).
Bitcoin’s tumble also brought other coins along with it. At one point, Ether had even shed almost 11% to USD$975.24 – the lowest since January 2021 – but eventually managed to climb back above the US$1,000 mark. Numerous alternative coins, including Solana and Cardano – and even meme coin Dogecoin – dipped as well. Stablecoins, too, struggled.
With this latest round of dips, the crypto market now stands at only a fraction of the total market cap when it soared during the Covid-19 pandemic, particularly in late 2021. The total market cap of cryptocurrency reportedly amounted to only around US$880 billion on Saturday morning, a far cry from the US$3 trillion recorded back in November 2021.
Most major industry players attributed the weekend swing mainly to the United States Federal Reserve’s decision to raise interest rates by 0.75%, seeking to drain liquidity from markets and to fight inflation. This has affected not just the crypto market, but also the broader market, which is seeing a similar downturn; the FTSE All-World index, for instance, was down 5.6% last week, while the S&P 500 index dropped 5.8%.
However, the crypto market is particularly badly hit because it was also recently hounded by a fairly extensive list of bad news, starting with the collapse of the Terra blockchain last month. Barely recovering from the ordeal, the market was again pummelled repeatedly by several other negative developments. Crypto lenders Celsius Network Ltd and Babel Finance, for instance, both decided to halt withdrawals last week. Meanwhile, crypto hedge fund Three Arrows Capital also revealed that it suffered large losses and is considering asset sales or a bailout.
“Surging recession fears are crippling appetite for risky assets and that has crypto traders remaining cautious about buying Bitcoin at these lows. The news flow has been terrible for cryptos,” said senior market analyst at US-based forex broker Oanda, Edward Moya.
On the other hand, the head of crypto and digital assets strategy at Bank of America Corp, Alkesh Shah commented that these latest dips may actually be a positive thing for the market. “Investors are continuing to position defensively following last year’s liquidity-driven digital asset bull market. Although painful, removing the sector’s froth is likely healthy as investors shift focus to projects with clear road maps to cash flow and profitability versus purely revenue growth,” he said.
(Source: The Edge Markets)
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