12 May 2022 Marsha Tusk
Bitcoin Back To Late 2020 Levels, Erasing 2021 Gains
Bitcoin, the largest crypto to date effectively erased all of its 2021 gains, as the price for the leading crypto dropped to a low of $25,401.05, data from CryptoBrowser shows. The last time Bitcoin visited the $25,000 level was on December 28, 2020, only to explode to its all-time high of $68,789.63 in November 2021.
Source: CryptoBrowser
Now, as the overall crypto market entered a bearish trend, the 2021 gains went back to zero. Bitcoin has lost a third of its value, or $13,000, in just eight days, and is down more than 45% so far this year.
Crypto market cap shrinks, Terra slumps
Bitcoin‘s rapid devaluation managed to tumble down the entire crypto sector, with Ethereum also recording heavy losses, which has shed more than half its market value so far this year. Other projects also felt the bearish trend, but the latest Terra (LUNA) slump and the UST de-pegging further placed immense stress, which saw a half of the total crypto market cap evaporating.
„The Terra incident is causing an industry-based panic, as Terra is the world‘s third-biggest stable coin,“ Ipek Ozkardeskaya, a senior analyst at Swissquote Bank noted, referring to the UST de-pegging, which induce an avalanche of events, pushing Terra‘s price down to sub-$1 levels.
„The crypto sell-off has been driven by the daunting macro backdrop of rising inflation and interest rates that has sent shockwaves through the tech sector, dragging cryptos down with it, confirming that Bitcoin and others serve little purpose as a hedge against inflation,“ Victoria Scholar, head of investments at Interactive Investors added.
Bitcoin mining stocks also took a hit
The LUNA case still holds many unknowns, but the broader crypto market price slump translated into the stock market, as stock prices of some of the largest publicly-traded BTC mining companies are freefalling.
Indeed, five of the largest mining stocks by market capitalization took a dip, with year-to-date (YTD) losses of more than 50%. Companies like Marathon Digital Holdings, Riot, and Hut8 are down over 60% YTD, according to data from Arcane Research.
Crypto mining companies are experiencing a double-sided push-down since apart from Bitcoin losing value, the market makes fewer transactions, which means less work for Bitcoin miners.
Nevertheless, the hash rate for Bitcoin‘s blockchain recently reached an all-time high, which indicates that despite the turbulence, the blockchain sees more and more computing power being deployed to validate Bitcoin transactions.
However, Jaran Mellerud from Arcane thinks that the combination of low Bitcoin prices and high hash rate pushes mining companies to mine less Bitcoin.
“Most of these companies have not grown their hashrate as fast as investors were hoping. Investors may have adjusted their growth assumptions for these companies to more conservative territories.” Mellerud concluded.
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