A Perfect Storm: Myriad Factors Drive Bitcoin To Lowest Since December 2020
Bitcoin prices have plummeted lately, falling to their lowest in more than a year as the digital currency struggles with multiple headwinds.
The world’s most prominent cryptocurrency dropped to as little as $22,600 today, TradingView figures reveal.
At this point, the digital asset was down more than 67% from its all-time high of roughly $69,000 that it reached in November, additional TradingView data shows.
Further, it was trading at its lowest since December 2020.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
A Perfect Storm
When explaining what fueled bitcoin’s latest losses, several analysts cited a range of factors as pushing the cryptocurrency lower.
Josh Olszewicz, head of research at Valkyrie Investments, commented on the situation.
“A combination of market forces are quickly converging with a significant bearish feedback loop; rising inflation, rising interest rates, downturns in traditional finance, and rising volatility. All of which is shaking investor confidence, including in digital assets,” he stated.
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Olszewicz also spoke to the latest developments surrounding crypto lender Celsius, which recently announced that it was “pausing all withdrawals, Swap, and transfers between accounts” in an effort to “stabilize liquidity and operations.”
He noted that “starting last Friday and through the weekend, Celsius positions in the DeFi ecosystem appeared to have become increasingly illiquid, pointing to potential trouble meeting immediate withdrawal obligations.”
Jack McDonald, CEO of fintech firm PolySign, also weighed in on these developments.
“There are a number of troubling factors at play here, ranging from record inflation and fears of recession to the war in Ukraine to the most recent situation with Celsius as well as Binance,” he stated.
Armando Aguilar, an independent cryptocurrency analyst, also noted the range of variables affecting the digital currency markets.
“Ramping inflation and the Fed’s monetary tightening coupled with interest rate hikes has put pressure on the equity markets which have been closely correlated with the digital assets,” he stated.
“Equities have suffered great declines and the S&P has technically entered a bear market.”
Lackluster Investor Sentiment
Aguilar, along with other analysts, spoke to the impact that the Celsius situation, as well as other key variables, are having on the mindset of investors.
“Celsius’s latest move to freeze client assets from being withdrawn will definitely taint investor confidence,” he stated.
“With $12bn of client assets now stuck, investors will look to move their capital from similar lending platforms as FUD is running rampant.”
“Additionally, it will bring more scrutiny from regulators into the industry for all lending and borrowing crypto businesses as they will try to protect consumers,” Aguilar predicted.
Brett Sifling, an investment advisor for Gerber Kawasaki Wealth & Investment Management, also spoke to investor sentiment, claiming that it had reached “one of the lowest points in history” due to factors like geopolitical turmoil, Federal Reserve interest rate hikes and concerns about inflation.
“With crypto like Bitcoin being such a speculative asset, people are quick to dump their exposure in exchange for safer assets,” he predicted.
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and sol.