Bitcoin quotes are plummeting. During Wednesday’s session when this text was written, the most popular cryptocurrency fell for the seventh day in a row. Bitcoin quotes marked a new low in the current bear market in the morning and approached the psychological barrier of USD 20,000.
The market is still bleeding
Concerns about the dynamic pace of monetary tightening in the United States influenced investors’ risk aversion. It is mainly cryptocurrencies that are suffering, and the value of the whole market has dropped to around $865 billion. For comparison, the all-time capitalization record at the end of last year was around $3 trillion. Bitcoin quotes in November set an all-time high above 68 thousand. USD, and on Wednesday afternoon they were around 20.1 thousand. usd. Small digital currencies work even less well. Ethereum, number two after bitcoin in terms of capitalization, has fallen by more than 70% this year.
– Cryptocurrency fans have gotten used to the crazy roller coaster, but what we are dealing with today is becoming unbearable even for them. The era of cheap money is coming to an end, so investors are increasingly risk-averse and away from cryptocurrencies, said Hargeaves Lansdown analyst Susannah Streeter.
Specialists point out that such a difficult situation in the crypto market has not existed for a long time.
“The current bear market is entering a phase identical to the deepest and darkest phases of the previous bear market,” Glassnode analysts said. Experts have admitted that even long-term cryptocurrency holders who used to be the most persistent are now under tremendous pressure.
The fear in the cryptocurrency market was further aggravated by cryptocurrency lender Celsius Network, which halted withdrawals, exchanges and transfers.
Meanwhile, Glassnode strategists have reasoned that changes in the net position of holders — the most diehard investors who never sell digital currencies, but only buy them — can be used to estimate coin sizes. collected or distributed. The reading suggests that around 15-20,000 bitcoins are transferred monthly to holders, which means a decrease of 64%. from early May, indicating a declining accumulation.
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Bitcoin has fallen 30% in the past three days, the biggest drop in history.
‘Bitcoin trading is now like trading penny stocks,’ Brian Nick, Nuveen’s chief investment strategist, told Bloomberg. The Crypto Fear & Greed Index, which illustrates the sentiment in the cryptocurrency market, currently points to extreme fear.
Businesses count losses
The crash in the digital currency market has damaged not only the portfolios of individual investors, but also companies that, on the wave of the recent cryptocurrency boom, have decided to invest in e.g. in bitcoin.
One such company is Tesla. Elon Musk’s company bought Bitcoin for $1.5 billion in February 2021 and was in significant positive territory for a while. Everything changed after the last wave of declines. Tesla is now theoretically losing over $0.5 billion on its bitcoin factory, even though last March it sold some digital currencies for $128 million. However, it’s possible that Tesla has sold more bitcoins since submitting its last report to regulators.
Micro Strategy has an even bigger loss in the cryptocurrency market. The company headed by Michael Saylor has been accumulating bitcoins since August 2020. At the end of the first quarter, the average price at which MicroStrategy acquired its bitcoins was $30.7 thousand. usd. Brutal drops to around 20,000 USD put the company in trouble. He is currently likely to have a loss of over $1 billion on his investment.
Investors are dumping MicroStrategy shares over fears of a continued cryptocurrency armageddon. Already on Monday, the company’s shares plunged 25%, and on Wednesday, in pre-session trading, shares fell nearly 10%. Despite the extremely negative mood, the CEO appealed to common sense and, as usual, assured that there was no need to worry and that the company had no intention of sell his bitcoins.
Another company that has invested in bitcoin is Block, a fintech formerly known as Square. The company owns 8,027 bitcoins and the potential loss on this investment is around $50 million.
Companies related to cryptocurrency trading are also starting to have problems. Coinbase, one of the largest cryptocurrency exchanges in the world, said it would cut 18%. employees, i.e. approximately 1,100 people. The reason given was the need to reduce costs in the face of a possible recession and a long-term collapse of the cryptocurrency market.
However, not only companies, but even states have invested in cryptocurrencies. The Salvadoran government was buying up hundreds of bitcoins last year as it announced the cryptocurrency would become legal tender.
Since September 2021, the government of El Salvador, led by President Nayib Bukele, has amassed 2,301 bitcoins worth US$103 million. Now they are worth at least half. The International Monetary Fund has previously expressed concern about the sustainability of the Bitcoin experiment in El Salvador. In turn, the World Bank refused to help the country in its plans to adopt bitcoin as a means of payment.