Crypto winter: Bitcoin in ‘something of a recovery’ amid fears worst yet to come
Bitcoin has seen “something of a recovery” as cryptocurrency investors have been left counting their losses after a crash this week.
Cryptocurrencies including Bitcoin and Ethereum hit historic lows on Thursday in a major price meltdown that wiped out previous gains.
Over the past week, the price of Bitcoin has plunged more than a fifth after investors sold off their digital assets. It hit a 16-month low of $25,400 on Thursday.
However, Bitcoin was up 14 per cent on the last day and surpassed the psychological milestone of $30,000 on Thursday morning, trading around $30,500.
However, Bitcoin was still down by more than 55 per cent since its November peaks, analysts noted.
“Equity market losses, concerns about inflation, and instability in the stablecoin market have sent shockwaves throughout the crypto complex this week, prompting fears of a ‘crypto winter’,” according to Victoria Scholar, head of investment at Interactive Investor.
“Opportunistic buyers” had snapped up cryptos at a discount overnight, Scholar explained, pointing to the US indices Nasdaq and S&P 500.
“$30,000 remains the key technical level to watch on Bitcoin, with a sustained drop below potentially paving the way for further declines,” she added.
Whether the slight boost in performance on Friday was a sign of a healthy recovery to come remains to be seen, analysts cautioned.
“I don’t think the worst is over,” Scottie Siu, investment director of Axion Global Asset Management, a Hong Kong based firm that oversees a crypto index fund, told the Reuters news agency.
“I think there is more downside in the coming days. I think what we need to see is the open interest collapse a lot more, so the speculators are really out of it, and that’s when I think the market will stabilise,” he added.
Other cryptocurrencies have continued to take huge hits to their value, with the price of Luna falling from $60 each on Monday, to $0.00003748 on Friday morning.
The total value of all Luna, which started the week as the fourth-most popular coin globally, has fallen from over $20bn (£16.4bn) on Monday to $264m on Friday.
Luna props up the value of so-called ‘stablecoin’ Terra, which is formulated as tied to the price of the dollar.
As confidence in the price maintenance system has been battered, there has been a rapid sell-off of Terra, which has sent Luna’s price plunging.
As reported by CityA.M., major exchanges halted trading of Terra after 99 per cent of the coin’s value was wiped off in a week.
“The fundamentals of any market crash are the same – people are selling their assets,” crypto expert Richard Melkonian told CityA.M.
Melkonian described the crash as the result of an “overall state of fear” among investors and warned big players may be “wiped out” in this unprecedented “storm”.