On Friday, the price of one bitcoin plummeted below $30,000, down from more than $64,000 in November. The sell-off is being fueled in part by increasing interest rates and 40-year-high inflation.
Bitcoin, which enjoyed spectacular increases last year, has lost more than half its value in the previous six months.
Since peaking at more over $64,000 in November, the price of one bitcoin has dropped by more than half. It was trading about $30,000 on Friday, after sliding as low as $26,000 earlier in the week.
The sell-off is linked in part to increasing interest rates and inflation, which has put the larger stock market into a tailspin.
However, those investors who purchased bitcoin during its most recent price surge may be shocked by the magnitude of its collapse.
A slew of online narratives, some of which have been echoed in mainstream business publications, have declared bitcoin to be untethered from traditional investment markets, and even to be a reliable hedge against the kind of inflation that the United States and other parts of the world are currently experiencing.
However, the recent bitcoin sell-off occurred in the context of a broader market slump, which looks to refute the claim that bitcoin is immune to traditional market pressures, according to analysts.
“That was a story, but it’s not accurate,” said Damanick Dantes, an investor and cryptocurrency market analyst at CoinDesk.
Instead, bitcoin’s price trend resembles that of volatile technology equities for businesses that frequently operate at a loss despite significant growth, according to Dantes. In other words, trading on bitcoin these days is no different than betting on a software business with plenty of potential but little apparent short-term value.
Growth in those assets, according to Dantes, is typically fuelled by what he refers to as investors’ excess risk budgets, which are frequently connected with low interest rate settings. He believes bitcoin’s sell-off is unsurprising given that interest rates have increased and investors’ appetite for risk has waned.
He stated, “Investors and traders are increasingly seeking for consistency, as well as high-quality value locations. That is the polar opposite of a cryptocurrency like bitcoin.”
