Bitcoin plunges to lowest level since December 2020
World’s largest cryptocurrency has lost nearly half of its value since the start of 2022
Bitcoin traded down by 12% earlier on Monday, plunging to its lowest level since December 2020. At $23,909, the world’s first and largest cryptocurrency stood almost 50% below the level at which it began 2022.
Indeed, BTC has fallen by 65% since the $68,789 all-time high that it recorded on 10 November last year. Having stood at a record $1.27trn seven months earlier, the cryptocurrency’s market capitalisation sank as low as $455.8bn earlier today.
The wider cryptoasset sector followed Bitcoin’s lead, falling by 11% to $979bn.
Although the size and speed of Monday’s sell-off may have taken some Bitcoin investors by surprise, it is only the latest step in an ongoing bearish trend that has accelerated in the past two months. In large part, this momentum has been dictated by macroeconomic factors.
In particular, the global shift in central bank strategy to combat runaway inflation by raising interest rates has triggered a cycling out of more speculative investments, such as technology stocks and cryptocurrencies. Both sectors enjoyed runaway growth during the stimulus-packed period during the Covid-19 pandemic.
The collapse of Terra Luna, in which more than $40bn in value was wiped out in May, only exacerbated this bearish momentum and anxieties about the viability of popular crypto projects.
Bitcoin critics vocal, advocates muted
Bitcoin’s largest critics hailed the latest sell-off as vindication of their long-held scepticism on Monday.
Prominent commentator and investor Peter Schiff joked on Twitter that Bitcoin was on its way to the moon – except it was heading there from Pluto. “After it shoots past the moon, it’s headed straight for Earth. Just don’t look for a soft landing!” he added.
Bestselling writer Nassim Nicholas Taleb, who previously praised Bitcoin as a potential saviour from central bank-generated inflation, observed: “Something like Bitcoin with purely circular attributes (which includes no yield) becomes less attractive at a lower price, in a path dependent way (a fall from grace).”
In contrast, the social media accounts of Bitcoin’s most vocal advocates, such as the President of El Salvador Nayib Bukele and MicroStrategy CEO Michael Saylor were noticeably muted.