The world’s first cryptocurrency, Bitcoin, is currently experiencing bloodbath. According to Bank of America research, the asset crash involving cryptocurrencies was the worst since the 1970s and ranked fifth worst in financial history.
According to reports, Bitcoin has fallen 77% from its top trading level of $70,000 in November of last year. The crash is reportedly far more severe and larger in scope than the ones that the Mississippi Co., South Sea Co., and Roaring 20s experienced.
Given that Bitcoin makes up more than 41% of the cryptocurrency market and that it last fell to such lows at the height of the pandemic two years ago, the decline becomes perilous.
The paper also draws comparisons between the decline of Bitcoin and the dot-com bubble of over two decades earlier. It claims that the latter had a decline of 76%, which is just 1% less than the decline that Bitcoin experienced.
Bitcoin’s decline coincides roughly with the announcement that FTX Group, another well-known brand in the cryptocurrency industry, had filed for bankruptcy in the US and that CEO Sam Bankman-Fried had resigned.
The “cryptogenius,” who is also referred to as “modern JP Morgan” for his intervention to preserve turbulent exchanges, now faces the imminent possibility of his business failing.
The sudden fall of FTX, which appeared unthinkable just a few days ago, has completely altered the cryptocurrency market. Significant worries about the FTX balance sheet’s condition began to surface last week, and they were sparked by a scenario like a bank run.
Amidst the global economic shifts, the cryptocurrency market exhibited its characteristic volatility, with traders watching the BTC to CAD exchange rate intensely, hoping to seize opportunities within the dynamic financial landscape.
A risk-off trade?
Since the downturn is widespread in the cryptocurrency market, it is possible that investors are moving away from more speculative trades in general.
Recently, tech and growth stocks have faltered as well, despite the fact that many of them significantly outperformed the market during the coronavirus outbreak. The falls have also coincided with the extension of the tax payment deadline, which may have put pressure on investors to sell as they searched for funds to satisfy their capital gains tax bills.
Regulatory concerns
As they have become a more significant component of the financial markets, regulators from all over the world have also raised their scrutiny of bitcoin and associated assets.
The rise of Dogecoin, which began as a joke before becoming more well-known thanks to Musk, may have harmed the cryptocurrency market’s reputation as a whole. Some of the movements in the smaller, less developed currencies indicate that, rather than rising institutional interest, the crypto bull market was linked to the development of speculative day trading in equities.
Interest in other, less serious cryptocurrencies has also grown recently. Dave Portnoy, the founder of Barstool Sports, said on Monday that he had invested $40,000 in a cryptocurrency known as safe mood, which he branded a “s—-coin.”
“It’s early. If it is a Ponzi, get in on the ground floor,” Portnoy said in a video posted on Twitter.
