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New bitcoin investors have felt the thrill of the latest epic digital currency rally. Now they experience the other side of this race.
Bitcoin went from $ 5,000 in March 2020 to nearly $ 64,000 in April 2021. It then fell to $ 29,002; On Friday, it stood at $ 32,212.
As severe as the recent sale is, it is nowhere near being the worst in digital currency history in 12 years.
Since 2012, bitcoin has suffered 14 sales over 30%, six over 50% and three over 80%, according to data from Visual Capitalist.
The deepest of these massive sell-offs was followed by long periods of flat trading. This is a cycle that has been called the crypto winter.
In October and November 2013, bitcoin multiplied by 10, then fell 87% until January 2016. In 2017, the price rose almost 20 times, then fell 84% the following year. It did not regain its previous higher until the end of 2020.
Bitcoin is primarily driven by sentiment and risk appetite, DailyFX analyst Peter Hanks said. Once an asset driven by these factors starts to fall, it’s easier for them to keep falling, he said.
I think bitcoin is definitely heading for more losses here, Mr Hanks said. With $ 30,000 having been broken through, the next major level is $ 20,000, he said. If he breaks that, then the crypto winter is definitely back on the role.
Each cycle rally has been driven by a new group of buyers, and each massive sale has seen many of them leave the market. It can happen again. Bitcoin’s biggest problem isn’t a crackdown by China on cryptocurrencies or Elon Musks’ sarcastic tweets, JP Morgan analyst Nikolaos Panigirtzoglou said. Its problem is that the money leaves the asset class.
More than a month after the May 19 crypto crash, bitcoin funds continue to bleed, he wrote in a report. Institutional investors, who tend to invest through regulated vehicles such as publicly traded bitcoin funds or Bitcoin CME futures, still show little appetite to buy bitcoin trough.
For the week ended June 18, crypto funds recorded outflows of $ 79 million, according to investment firm CoinShares. This was the third straight week of cash outflows, totaling $ 211 million. The skid marked the longest such streak since February 2018.
Bitcoin-only funds, the company noted, suffered a sixth straight week of cash outflows: $ 89 million last week and $ 246 million in total for the first three weeks of June.
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Many in the market still believe the institutional money will come back, although it may take longer than expected, said Sam Bankman-Fried, the founder of the FTX crypto exchange. Still, many companies in the industry have performed well this past cycle and are well positioned to weather a downturn. And he still expects more institutional investors to show up, eventually.
Overall, I think it’s a lot less deflated and sinister than previous declines, he said.
Write to Paul Vigna at [email protected]
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