In October 2021, we reported that Bitcoin had breached its $64,900 April ceiling, surging past $65,000. The world’s largest digital currency had jumped by 3%, to an initial high of $66,024.99, outclassing the earlier mid-April record. However, things are no longer looking so great for cryptocurrency.
As announcements reveal that the Federal Reserve plans to withdraw stimulus from the market, riskier digital currencies around the world are facing negative consequences, reported Bloomberg. Bitcoin, for instance, dropped more than 12% on Friday to below $36,000, its lowest level since July.
It is now estimated that the asset has lost over 45% of its value since its peak in November. And it’s not alone: Other digital currencies such as Ether have also seen major decreases in value, illustrating a worrying trend.
In fact, it is now calculated that over $1 trillion has been lost from the aggregate crypto market, according to the Bespoke Investment Group. “It gives an idea of the value destruction scale that percentage declines can mask,” stated Bespoke analysts in a note.
“Crypto is, of course, vulnerable to these sorts of selloffs given its naturally higher volatility historically, but given how large market caps have gotten, the volatility is worth thinking about both in raw dollar terms as well as in percentage terms.”
The Biden administration has revealed that it will release a government-wide strategy for digital assets as early as next month and assign federal agencies the difficult task of evaluating the risks and opportunities that these assets carry. Will that be enough to stabilize crypto markets? At the moment, probably not, as the worry is too high.
“Bitcoin is being battered by a wave of risk-off sentiment. For further cues, keep an eye on traditional markets,” Antoni Trenchev, Nexo co-founder and managing partner told Bloomberg. “Fear and unease among investors is palpable.”