Bitcoin fell below $31,000 for the first time since July 2021, bringing its decline from a November record high to more than 50% amid a global flight from riskier investments.
In New York, the world’s largest digital token fell as much as 11% to $30,339. The intraday drop is the largest since January 21. Ether was down as much as 11%, Solana was down 14%, and Avalanche was down 18%.
“We’re seeing a slow-motion meltdown, partially because it’s mostly been long holders selling” instead of levered liquidations, said Josh Lim, head of derivatives at New York-based brokerage Genesis Global Trading. “Now that some corporate treasuries are hovering near their cost basis, markets are waiting and watching to see if shareholders will force some de-risking.”
Michael Novogratz, the billionaire cryptocurrency investor and CEO of Galaxy Digital Holdings Ltd., has warned that things will worsen before they improve.
“Crypto probably trades correlated to the Nasdaq until we hit a new equilibrium,” Novogratz said on Galaxy’s first-quarter earnings call on Monday. “My instinct is there’s some more damage to be done, and that will trade in a very choppy, volatile, and difficult market for at least the next few quarters before people are getting some sense that we’re at an equilibrium.”
Monetary policy tightening to combat runaway inflation and dwindling liquidity is driving investors away from speculative assets across global markets.
Do Kwon, the founder of Terraform Labs, which powers the Terra blockchain, is working to strengthen its algorithmic stablecoin after it lost its peg to the dollar during the market rout.
Bitcoin’s recent decline puts it at risk of dropping out of the trading range in 2022, effectively reversing the most recent bull run that drove the token to a record of nearly $69,000 in November.
With its 40-day correlation with the S&P 500 stock index at a record 0.82, according to Bloomberg data, any further deterioration in equities sentiment risks dragging Bitcoin down with it.
To read our blog “‘Cross of Death’ for bitcoin may propel it to $25k by the end of 2022,” click here.
