How much has Bitcoin devalued since its all-time high?
The most famous cryptocurrency has been battered in recent month with more than $1 trillion wiped off its value.
Despite making some sort of comeback on Monday, Bitcoin investors have had some of the worst weeks in their investment journey. From a high of $69,000 in November, the cryptocurrency crashed to $32,951 last week, its lowest value since last summer.
And it's not just Bitcoin that has taken a tumble; many other cryptocurrencies have been hit by the slump. Ethereum, a common crypto for NFT users is also at its lowest since July, falling from over $3290 on January 20 to $2389 just five days later.
These developments have left investors asking why the market is so bad for crypto right now.
What has driven the crash?
Geopolitics such as the rising tension between Russia and Ukraine, as well as the announcement of reduced economic stimulus by the US Federal Reserve, have spooked investors in a multitude of markets.
“With the committee likely to signal its exact plans for the interest rate increase, many investors in the digital currency ecosystem are likely to start betting on more safe assets, thereby pulling funds away from crypto. Since the growth trend is now highly correlated with the stock market, any signs of potential recovery will be hinged on a wider correction in the stock market,” Alexander Mamasidiov, co-founder of the mobile digital bank MinePlex, told The Independent.
Were crypto coins overpriced? 2021 saw the currencies at their highest market value of all time. Furthermore, it is in cryptocurrencies nature to be volatile. There is no rhyme or reason to its crashes per se, unlike a traditional currency which will be effected by prices of goods, or wage growth. Bitcoin has suffered severe crashes in the past, with four other crashes over 50 percent market value in the last eight years.
Nations have also begun to crackdown on crypto with new or proposed legislation. The US is expected to introduce legislation to regulate crypto, as has Russia. Other nations, like the UK, are introducing more measures against its advertisement, to try and bring it into line with current gambling information.
Despite the troubles, the President of El Salvador, Nayib Bukele has doubled down on his support for the currency. Last year, the country introduced Bitcoin as legal tender. In the middle of the slump, the government purchased 410 bitcoins for $15 million.