Bitcoin suffered one of its most significant declines this week, dropping nearly 20% in value and hitting its lowest point in half a year. Other major cryptocurrencies faced even steeper losses, with most of them decreasing by more than 20% since Sunday. Collectively, these losses have wiped out more than $300 billion from the cryptocurrency market, sparking investor concerns that the bull market might be ending.
The recent downturn in the crypto market can be linked to wider economic instability, which caused significant drops in stock markets around Asia and Europe on Monday. The cryptocurrency market frequently falters along with traditional financial markets as investors try to sell off riskier and more volatile assets.
According to Simon Peters, a cryptocurrency analyst at eToro, risk assets suffered during Monday’s Asian trading session as a result of the United States’ weaker jobs report. In addition a strengthening Japanese yen following the recent increase in interest rates by the Bank of Japan. Peters noted that technical signs might indicate that Bitcoin has reached its lowest point, which could open the door for a rebound.
Weak employment data released by the United States last week raised concerns about a recession in the greatest economy in the world and set off the most recent decline. Due to this, the Nikkei 225 had a 12.5% decline while the Euronext 100 and FTSE 100 saw declines of 3%. Bitcoin fell below $50,000, and Ethereum (ETH) experienced a sharp decline, losing more than $1,000 in value within days, down from $3,300 at the beginning of the month.
“Panic has spread through crypto markets as users experience selling pressure waves,” said Arthur Firstov, head business officer at a cryptocurrency payments provider. “The broader digital token sphere is experiencing significant losses in stock markets due to fears of a U.S. economic slowdown, which is stoking rumors of a Fed emergency interest rate drop.”
Firstov noted that while cryptocurrencies still function as “hair-trigger, risk-off assets,” the market should survive any abrupt sell-offs given the recent structural growth.
Two significant incidents this year helped Bitcoin reach a record-breaking surge that peaked in March at $74,000. First, institutional investment in the crypto market garnered billions of dollars after the U.S. SEC approved the first-ever spot Bitcoin ETF in January.
The second significant event was the bitcoin halving event, which cut the mining incentives in half. The abrupt decrease in supply and the rise in demand supported both Bitcoin and the rest of the cryptocurrency market before the most recent decline. Industry companies such as Riot Blockchain Inc. (NASDAQ: RIOT) will have to come up with mechanisms to bolster their bottom lines if the market remains jittery for a longer spell.
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