Bitcoin price and crypto markets tumbled to a new low for this year as investors, spooked by sell-offs in equity markets and the prospect of an economic recession, sold off their crypto holdings. At 19:23 UTC, the price of Bitcoin was $30,752.28, down by more than 11% from its price a day ago. Ethereum’s Ether, the world’s second largest cryptocurrency by market capitalization, was also down by 11.4% to $2,271.36 in the last 24 hours. The overall market cap of cryptocurrency markets fell sharply, from $1.58 trillion to $1.4 trillion, before recovering slightly.
Bitcoin price has declined approximately 35% from its price at the start of this year. The losses are even more steep – more than 55% – when you consider its price trajectory from November, when it reached a record high. Even as it has become harder to mine the cryptocurrency, external factors have added to the selling pressure on traders. Crypto’s descent has occurred in tandem with that of the broader market.
Why Are Crypto Markets Declining?
So, why have investors soured on an asset class that is often touted as a hedge against risk in mainstream markets and inflation?
While there is no clear answer to that question, the most likely reason is the general state of the global economy. Darshan Bathija, chief executive officer at Vauld – a crypto trading platform, told Bloomberg that investors are taking a “risk-off” approach to their investment portfolios. This entails cutting down on their risk levels by selling cryptocurrencies and stocks alike.
Indeed, broader market indices are all suffering the effects of investors withdrawal symptoms and have registered significant declines. Adding to worries for crypto investors are swirling concerns around the ecosystem. More than twelve years after Bitcoin kicked off a conversation about digital money, the ecosystem continues to be plagued with scams and hacks. In recent times, the shaky pegs of stablecoins like Terra, the world’s third biggest stablecoin, have also called into question the system’s viability.
Is The $30,000 Price A Floor?
The good news is that this might be a bottom of sorts for the cryptocurrency. Katie Stockton, founder at Fairlead Strategies, told CNBC that the short-term momentum has deteriorated around Bitcoin. “[It]…is no longer oversold from a short-term perspective,” she said.
According to Yuya Hasegawa, crypto market analyst at Bitbank, the next major move in Bitcoins price could occur on Wednesday, when April CPI figures are released. She said if CPI figures follow a slowdown in other inflation metrics, then it will ‘likely alleviate the market’s concern and help recover its risk sentiment.’
“Bitcoin’s long-term fundamentals have not changed in months, but growth/recession concerns have made this a very difficult environment for cryptos. No one is looking to buy the crypto dip just yet and that leaves Bitcoin vulnerable here,” Edward Moya, senior market analyst at OANDA, an online forex trading platform, wrote in a note.