The Bitcoin crash continues in 2022. For the fifth time in six days, prices of crypto continue to fall. As of today, Bitcoin is on pace to post its worst start to a year since cryptocurrency started.
Bitcoin Crash Continues, Goes Below $40,000 Last Monday
Created in 2008, Bitcoin started as a potential answer to the problems caused by the 2008 global financial crisis. While it started trading the following year, pricing information during the period remained in the dark.
Cryptocurrency’s pioneer coin fell as much as 6% to register at $39,774 at one point Monday. This brought the currency’s loss for the year to 14%.
This decline is currently the largest loss for the start of the year since 2012. For perspective, Bitcoin lost more than 40% in value since hitting an all-time high of nearly $69,000 in early November.
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Hawkish Federal Reserve Is Affecting Riskier Assets Such as Bitcoin
While the currency briefly went below $40,000 yesterday, it managed to get back quickly to close above $42,000 as of January 11. As of Jan 11, 4:39 AM UTC, the currency is trading at $42,274.90.
Getting back above $40,000 is a welcome relief, according to Bloomberg Intelligence’s Mike McGlone. He said that the $40k barrier is an important technical support level.
As to the recent series of Bitcoin crashes in price, McGlone said crypto remains a good barometer for investors’ appetites for risk-taking. Jay Hatfield, CEO of Infrastructure Capital Advisors, agrees with the sentiment.
“Cryptocurrencies are likely to remain under pressure as the Fed reduces its liquidity injections. Bitcoin could end 2022 below $20,000,” Hatfield noted.
Despite the current drop in value, McGlone said that Bitcoin will eventually come out ahead. The world is marching towards full digitization. Eventually, crypto such as Bitcoin will become the benchmark collateral.
COVID Pandemic Helped Bitcoin Become Even More Mainstream
With the pandemic limiting a lot of activities, many Americans turned into Bitcoin and other cryptocurrencies as additional investments.
Institutions soon followed suit, as they began tinkering with the crypto market and its ancillary programs. This was before high inflation began to creep into the economy.
As the Federal Reserve began to take inflation more seriously, it started adopting a more hardened approach such as raising interest rates and tapering its bond purchase programs.
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As a result, investors began returning to safer havens. They also started avoiding riskier assets like stocks and digital assets.
Noelle Acheson, head of market insights at Genesis Global Trading, said the exodus among speculators already started. The Bitcoin crash in prices appears to be the work of short-term traders rather than long-term ones.
“Tighter Fed policy affects not only interest rates but the equity risk premium as the Fed withdraws funds from the capital markets. Riskier investments such as unprofitable tech, meme stocks, and cryptocurrency are disproportionately affected relative to the rest of the market,” he added.
As these investments carry twice the volatility as the overall market, investors also considered the risks as double that of the average stock.
Watch the Quick Finance channel video reporting that Bitcoin Drops Below $40,000: Feds Are Crashing The Market:
With bitcoin prices crashing down to below $40,000 at one point yesterday, do you think now is a good time for new investors to buy? Or, do you agree that the reason why bitcoin prices fell is the same reason why everybody should avoid it?
Let us know what you think. Share your comments below.