Bitcoin coins on dollar bills
After two weeks anchored on the edge of $40,000, bitcoin breaks down, loses its support and falls to August lows. The setback in Russia and even in the US deflates its capitalization by 80,000 million euros in just 12 hours.
As analysts already warned at the end of last year, moments of stability and prolonged tranquility in the price of bitcoin “usually precede strong movements in this market.” For the past two weeks the price of the largest cryptocurrency had been locked in a much narrower range than usual, between $40,000 and $43,000.
Bitcoin, during all this time, struggled to resist above a key support in its price, according to analysts, that of 40,000 dollars. Once broken, the price of bitcoin is clearly unlocked to the downside, as manifested in the collapse of more than 7% which records today.
The magnitude of this setback has been enough for in just 12 hours it has lost 80,000 million of euros of capitalization, a figure similar to the entire value on the stock market of the largest Spanish company, Inditex.
In this short space of time, the price of bitcoin has gone from 43,000 to 38,000 dollars. In terms of capitalization, the collapse translates into losses of 90,000 million dollars, from 820,000 to 730,000 million dollars.
The loss of the support of 40,000 dollars enters the price of the largest of the cryptocurrencies in the zone of mnimos desde agosto. Along the way it has deflated already 45% from the historical records registered only two months ago, when on November 10 it touched the 70,000 dollars.
So far this year it is already down 17%, although long-term investors in bitcoin can still accumulate large gains. In less than two years, since March 2020, in the midst of the outbreak of the crisis unleashed by the coronarivus, its price still shows an upward balance of +660%.
Rate hikes
The investment rout in cryptocurrencies as a whole has been accentuated since the United States Federal Reserve turned to a more aggressive position in its comments on the course of monetary policy. The historical inflation figures have multiplied the pressure from the Fed, and its latest messages point to a roadmap that would contemplate between three and four rate hikes of interest this to.
Faster-than-expected tightening of financing conditions triggers a rebound in risk aversion in the markets as a whole, and accentuates the temptation to take profits in the higher risk and more appreciated assets in recent times. Cryptocurrencies, one of the most volatile and riskiest assets, have been unrivaled in terms of appreciation since the pandemic. Another of the star markets, the technological Nasdaq, has already lost close to 10% so far this year, and one of its most soaring stocks in recent times, Netflix, has collapsed up to 20% today.
Rejection of a new ETF
The effects of the planned rate hikes are not the only factor blowing against the cryptocurrency market. In the last few hours adverse news has been concentrated both from Russia and from U.S. The US regulator, the SEC, has rejected the approval of what would be the first exchange-traded fund (ETF) on bitcoin ‘spot’ prices. At the end of last year, it gave the green light to the first ETFs on cryptocurrency futures.
The SEC has argued its rejection of the new exchange-traded fund, First Trust SkyBridge Bitcoin ETF Trust, in an attempt to prevent fraudulent and manipulative acts and practices, in order to protect investors and the public interest.
Veto in Russia
The cryptocurrency market has suffered an additional setback in the last few hours. Russia, in the spotlight of the markets for its offensive on Ukraine, has decreed the ban on the use of cryptocurrencies, as well as from the mining in the crypto universe throughout its territory. With the veto imposed in China on this activity, Russia had acquired a growing weight in bitcoin mining worldwide.
The Russian central bank justifies the measure on the grounds that bitcoin and other cryptocurrencies are volatile and widely used for illegal and fraudulent activities.
New ‘hack’
Added to the regulatory pressures are the uncertainties about the security that generate the news of a new ‘hack‘ of a cryptocurrency market.
Crypto.com has confirmed that the attack suffered this week has affected about 500 users, although it ensures that the funds of its clients have not been compromised.
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