Bitcoin fell to $ 33,000 in January from a record nearly $ 69,000 less than three months ago.
Bitcoin is ending a difficult month, with the downturns in January putting the digital coin in rhythm for its worst start of the year since the dawn of “crypto winter” in 2018.
According to data collected by Bloomberg, the largest cryptocurrency in market value rose by only 11 days this month, which means that it spent 65% of the month in decline. Other digital assets also suffered, with the № 2 Ether token falling about 30% since late December.
Bitcoin fell to $ 33,000 in January from a record high of $ 69,000 less than three months ago amid a wider sell-off of risky assets amid growing confidence that the Federal Reserve will soon raise interest rates as it recovers its ultra- accommodation settings. The crash affected all parts of the crypto ecosystem, from bitcoin and memecoins to publicly registered crypto exchanges and miners.
“Crypto is a very variable asset class – and I hope that everyone involved in this market is aware of the potential for instability,” said Troy Gaeski, chief market strategist at FS Investments, by telephone. “It’s a much more complicated environment than six months ago, 12 months ago, 18 months ago, when it was in the green.” It is now “attention with a yellow light”.
On Monday, bitcoin fell 2.9 percent to trade at about $ 36,680 before recovering. Its monthly decline now stands at more than 18%, the worst start to the year with a 29% decline in 2018 and a grim follow-up decline of 19% in December.
The fall in prices has also led to lower volumes, according to a CryptoCompare report.
“Macro sentiment around risky assets is the leading narrative in the markets, with expectations of a significant reduction in quantitative easing” after a series of hot inflationary footprints, analysts wrote in the report. Investment products in digital assets have recorded outflows for the first time since August, with weekly outflows averaging $ 88 million so far in January, they said. And total assets under management for bitcoin products have fallen 23 percent since December.
Bitcoin lost about 50% of its peak in November to the bottom in January. This decline puts him at the “bottom of the range” of the big downturns, historically, according to Zack Pandle and Isabella Rosenberg of Goldman Sachs. The pair estimates that since 2011 there have been five previous major withdrawals for the coin from the then peaks of all time, with an average drop from a peak to a low of 77%. On average, the declines lasted seven to eight months, they wrote in a note. The biggest cumulative decline in bitcoin – a 93% loss – occurred in 2011, they said.
Although the recent turbulence in the market may not be so shocking for crypto veterans accustomed to its volatility, many investors have joined only relatively recently, making the rapid decline particularly painful.
“I’ve always said that if you’re uncomfortable waking up to a 30%, 40%, even 50% drop for some reason, you probably shouldn’t have it,” Gaeski said.
And memories of the last “crypto winter” – an expression endemic to the digital asset space that refers to a sharp decline followed by months of stagnation – rekindle fears that it could happen again. The last such decline occurred in 2018, when bitcoin fell by about 80% and subsequently took more than a year to reach a new peak.
“While bitcoin sales have been relatively subdued this week, the outlook for the cryptocurrency market remains broadly negative, with heavy losses seen in a number of once-popular altcoins,” said Nicholas Cowley, a strategist at DailyFX. “If the market as a whole is looking for bitcoin to take a higher level, it will probably be disappointed.”