cryptoknowmics.com
Bitcoin has dropped to its lowest level since the December flash crash, as rising borrowing rates put pressure on some of the best-performing assets in recent years.
In early Asia trade on Thursday, the largest cryptocurrency by market capitalization fell as low as $42,505. This dropped the price down to its lowest level since a weekend meltdown at the start of last month, when it hit $42,296. Bitcoin has risen by about 500 percent since the end of 2019 as a result of the COVID-19 pandemic's stimulus measures.
Other cryptocurrencies have also fallen in value. Ether, the second-largest cryptocurrency by market capitalization, made its own flash-crash bottom, dropping to levels not seen since October 13, and Binance Coin also fell to October levels. Popular DeFi applications' tokens, such as Uniswap and Aave, have declined.
“Given the current macro backdrop, leverage within the Bitcoin market, and recent robustness seen in the altcoin market, we think it’s appropriate to be overweight Ethereum and other smart contract platforms,” Fundstrat digital-asset strategists Sean Farrell and Will McEvoy wrote in a note Wednesday. “We probably would not bet the farm near-term on Bitcoin but think there is an opportunity in going long volatility via derivatives strategies.”
Cryptocurrency price swings have recently occurred during a moment of high volatility in financial markets. Inflationary pressures are pressuring central banks to tighten monetary policy, potentially reducing the liquidity tailwind that has boosted a variety of assets.
After minutes from the Federal Reserve hinted at the possibility of earlier and faster interest rate hikes, U.S. equities sank further. The S&P 500 dropped 1.9 percent, with real estate stocks leading the way, while the tech-heavy Nasdaq 100 dropped 3.1 percent. On Thursday morning, stock losses swept across Asia.
“The Fed is hawkish,” said Stephane Ouellette, chief executive and co-founder of crypto platform FRNT Financial Inc. “Knee-jerk reactions in crypto tend to treat them as exclusively risk assets in spite of the longer term trends around inflation, store of value et cetera.”
Other aspects of the cryptocurrency industry are also under threat. Analysts are rethinking their predictions following a record-breaking year for bitcoin mining stocks.
In early November, Bitcoin hit a new high of around $69,000 after US regulators approved Bitcoin futures-based exchange-traded funds.