Bitcoin (BTC) and cryptocurrency prices have been hit by an almighty sell-off this month, wiping around $1 trillion from the crypto market since early April. However, Elon Musk surprised some by signaling his continued support.
The bitcoin price has dropped to lows not seen since the pandemic crypto rally began in late 2020 after a perfect storm of Federal Reserve interest rate hikes, the scaling back of its huge $9 trillion balance sheet, and a huge $18 billion stablecoin meltdown, with the collapsed cryptocurrency luna staging a shocking rebound this weekend.
Bitcoin dropped following Biden’s order
Bitcoin dropped back below $40,000, erasing nearly all gains sparked by optimism about U.S. President Joe Biden’s executive order on crypto, as digital currencies fell along with stocks amid high inflation data and continued geopolitical uncertainty.
The largest cryptocurrency declined as much as 7.9% to $38,582 on Thursday, falling for the first time in three days. Ether fell as much as 5.7% to $2,553. Most of the top cryptocurrencies were down slightly in the 24 hours prior to 9:30 a.m. New York time. The spike came as optimism around Biden’s executive order on cryptocurrencies mounted. The order focuses on six key areas: consumer protection, financial stability, illicit activity, U.S. competitiveness in the industry, financial inclusion, and responsible innovation.
Some high-profile cryptocurrency industry players praised the U.S. government’s move. Cameron Winklevoss, the co-founder of the Gemini cryptocurrency exchange, called it a “watershed moment.”
Further details and expert opinions
Cryptocurrency price moves have increasingly become more correlated to movements in other risk assets like stocks as institutional interest builds and more short-term investors trading bitcoin like other risk equities have entered the market. Cryptocurrencies have been under pressure since bitcoin hit a record high of nearly $69,000 in early November. Since then, bitcoin has fallen by nearly 50%.
The leading crypto has been trading in a relatively tight range between $20,000 and $25,000 over the last few weeks, following several red-hot inflation reports and Federal Reserve’s decision to raise interest rates. Experts also point to the continuous war in Ukraine and inflation hitting a fresh 40-year high for why we’re seeing slumping prices in the stock and crypto markets. Experts say that the crypto market has been increasingly tracking the stock market lately, which makes it even more intertwined with macroeconomic factors. Ethereum has followed a similar pattern.
Bitcoin hasn’t been above $50,000 since Dec. 25, 2021. Despite the ups and downs, Bitcoin’s price has seen a nearly 70% drop in value since its all-time high above $68,000 on Nov. 10, set back by surging inflation, lagging recovery in the job market, and the Fed’s ongoing signals that it would begin winding down pandemic measures to support the economy. This week, Bitcoin’s price has fluctuated between $20,000 and $25,000.