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World | May 9, 2022

Big drop in Bitcoin price as ‘cryptoplunge’ continues

/ Our Today

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A bitcoin representation is seen in an illustration picture taken at La Maison du Bitcoin in Paris, France, June 23, 2017. (Photo: REUTERS/Benoit Tessier/File)

Bitcoin continues to take a battering with its price dropping by more than half of what it was at its all-time high of US$69,000 in November 2021.

Today it made a steep fall by dropping 5.2 per cent over the past 24 hours to US$32,940 at 7:00 am Eastern Time (ET). This marks the fifth consecutive day of decline for Bitcoin and a weekend of prices nosediving.

Since Friday, the cryptocurrency has broken below its three-month rising trend line, falling out of the $35,000 to $46,000 range that it has been hovering in since the start of the year. Bitcoin’s recent decline puts it at risk of firmly dropping out of this range, completely reversing the most recent bull run that drove the token to a record of almost $69,000 in November

Market analysts are now saying the precipitous fall in prices could be the start of a new market trend, as Bitcoin’s valuation approaches the lowest level it has seen since July 2021. In the meantime, billionaire cryptocurrency investor Michael Novogratz, who leads Galaxy Digital Holdings, is expecting things to get worse before they get better.

More damage to come

Novogratz commented today that, “My instinct is there’s some more damage to be done, and that will trade in a very choppy, volatile and difficult market for at least the next few quarters before people are getting some sense that we’re at an equilibrium.” Tightening monetary policy to combat runaway inflation and ebbing liquidity are turning investors away from speculative assets like Bitcoin across global markets.

Adding to the caution around digital assets, the value of TerraUSD or UST, an algorithmic stable coin that aims to maintain a one-to-one peg to the dollar, slid below $1 over the weekend before recovering.

Edul Patel, CEO of Mudrex, an algorithm-based crypto investment platform told Bloomberg, “the downward trend is likely to continue for the next few days,” adding “Bitcoin could test the $30,000 level.”

With Bitcoin’s 40-day correlation with the S&P 500 benchmark at a record 0.82, according to Bloomberg data, any shock that leads investors to retreat to safer corners of the market tends to hit riskier tech stocks and crypto currencies worse than other assets.

Dashing Bathija, CEO of Singapore-based crypto exchange Vauld, told Bloomberg, “in light of fears of rising inflation, most investors have taken a risk-off approach—selling stocks and cryptos alike in order to cut down risk.”

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