Markets across the world experienced pullbacks last week, and crypto was by no means immune to these. The likes of Bitcoin and Ethereum have seen previous price benchmarks wiped out, with new price floors mooted on the back of a poor week for world markets in general. Stock markets experienced their worst trading days since the introduction of Covid-19 lockdowns in March 2020, and crypto markets themselves have seen values in popular tokens fall to lower than what we saw at the end of 2020. Pessimism remains in stocks — whether it remains in crypto, only time will tell
Bitcoin experienced its most extreme drop in value since May 2021 over the course of the previous 10 days, with over $3k wiped off its value over the course of last week, and over $9k to this current date. Back in May 2021, BTC fell from $43k to $35k — however this time around it sits closer to $31k, straying into the high 20s at its lowest point. This price level brings Bitcoin back to pre-2021 values, when the world’s most popular token started the year close to $29k, and was at the starting point of a famous bull run which took it to over $60,000 at its peak. Whether it marks the end of the BTC value drive remains to be seen, but such a fall will no doubt be alarming to crypto enthusiasts.
The previous $3,000 benchmark we mooted for Ethereum is now a distant memory. Although ETH started the week promisingly, it took its lead from the market and sank from over $2.9k to approximately $2,550 at the close of play on Sunday, with its decline beginning on Thursday at the opening of US stock market trading. Those who are looking to buy the dip will be waiting patiently for their moment, however it’s currently unclear when that moment will come.
Considering trading activity, short term traders would have had the most joy between late Wednesday and early Thursday, with many coins rising by high single figures. Come Thursday morning US time however, the dip began to set in, and stocks fell 5% — the effects subsequently rippling through the crypto market. Very small gains may have been available via a solid swing trading strategy or automated trades at the beginning of the week, however any grand plans for significant gains in a bull market would have been soon dampened come Thursday.
With all that said, Bitcoin actually traded steadily until Thursday — as did most of the crypto market in general. It was the previously mentioned sell-off of stocks across the US stock market that had a significant ripple effect on crypto, and it is still feeling the pinch from this. It is no coincidence that crypto followed stocks in its sentiment, and it is proof of how they are both cohabitating the same investment world together. The overall fall in stock market value was the worst since 2020, as a result of the introduction of Covid-19 related lockdowns, and the effect this has had on crypto proves once again that it is not currently in a position where it can operate in its own world away from the winds of the wider market. Being a digital asset doesn’t ring fence cryptocurrencies from wider market sentiment.
One thing that is worth observing is that the close intertwining of crypto to the stock market is, amongst the price falls, evidence of the positive strides that the industry continues to make. If no attention were being paid to crypto, the movement of stock markets would have been an irrelevance to it, however we are clearly seeing that crypto is indeed an investment that is being made by many traders in the market.
Coming into this week, there has been a sharp market decline on Monday and Tuesday, with coins such as Terra having over 50% of its value wiped out in the space of just 2 days. Generally, markets are down close to 20%, with little sign of an immediate recovery being observed at this present moment. Bitcoin will want to keep its head above $30k, and this will surely be used as a benchmark for the direction of the rest of the market. With top economists believing we are not yet close to the bottom of the stock market fall, it would be negligent to ignore the impact this could have on the crypto market in weeks to come.
