Enduring crypto rout: Testing times for diehard faithful
January 26 2022 12:20 AM
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The cryptocurrency market is known for frequent and extreme speculative frenzy with Bitcoin standing as a perfect measure of the wild ride.
Over the weekend, more than $1tn in crypto-market value was just wiped out in a jiffy. Friday’s decline led to the liquidation of more than $1.1bn in crypto futures positions and overall more than $1tn in market value was destroyed since the last peak.
The enduring downturn in digital assets in recent weeks continued to play out into this week. Early yesterday, Bitcoin was trading around $36,230. On Monday it hit a six-month low of $32,950.72, having halved since its latest all-time high of $69,000 hit in November.
Even long-time bulls are starting to wonder out loud at what point the battering might end. But, crypto fans have an infinite supply of optimism and many are confident that with Bitcoin already spending two-thirds of the year in the red, better times could come soon.
On the other hand, regulators from Russia, the UK, Singapore and Spain have all announced interventions that could undermine crypto companies looking to grow in those regions. Tightening US monetary policy has also left traders anticipating several interest rate hikes this year.
Meanwhile, the Biden administration is said to preparing to release an initial government-wide strategy for digital assets as soon as next month and task federal agencies with assessing the risks and opportunities that they pose.
Bitcoin’s decline since its November high has wiped out roughly $600bn and greater than $1tn has been lost from the aggregate crypto market, according to a Bloomberg report.
The largest ever occurred last summer, when a decline that peaked at the end of July wiped out $646bn for Bitcoin.
For sure, Bitcoin is no stranger to speculative seesaw rides.
In December, the world’s most popular cryptocurrency sunk almost 20%, roughly the same as the second-biggest coin ether, with risk appetite hit by inflation fears and a quicker pace of interest rate hikes from the US Federal Reserve.
In 2017, it went from about $1,000 to around $20,000.
In early 2020, it sunk below $4,000 at one point before beginning a dizzying rise.
Yet advocates of Bitcoin and other coins say the increasing acceptance of cryptocurrencies in mainstream financial and investing in recent years has shored up the sector.
In a wider sense, there are a few factors responsible for the extreme volatility.
Bitcoin is held by relatively few people, meaning that price swings can be magnified during low-volume periods. And the market remains hugely fragmented with dozens of platforms operating under different standards.
As a matter of fact, no-one has been known to reliably predict Bitcoin’s characteristically wild price swings.
The behemoth token is once again experiencing one of its rockiest times. And the extreme price swings throw the spotlight on an asset known for its turbulence.
With it, the argument Bitcoin is a form of “digital gold” is also falling apart.
As the world’s largest cryptocurrency plunges to new lows, its decline in tandem with risk assets such as tech stocks is casting a shadow on a long-touted similarity to gold.



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