The cryptocurrency Bitcoin fell precipitously to a six-month low as Ukraine war fears made markets uneasy across the world on Monday. Trading in the most well-known cryptocurrency was down 7.4%, to $33,650, its lowest level since July 24, 2021.
This amounts to a whopping $130 billion that disappeared from the crypto markets in a 24 hour period. Ether plunged as well, coming down more than 50% from their all-time highs.
Another wrinkle was added to the ongoing unease globally about the situation in the Ukraine, as higher risk assets such as technology stocks were also sold off as investors look toward a tighter monetary policy from the U.S. Federal Reserve, which will be accompanied by higher interest rates.
Bitcoin plunges as Ukraine unease now coupled with inflation woes
Coin Metrics had Bitcoin down approximately 4% ,at $33,755.57; its cryptocurrency rival Ether plunged an even greater 7%, down to $2,239.08. Earlier on Monday, they had fallen to their lowest points since July of last year, representing approximately half of what they were worth at their all-time highs.
Stocks are also seeing a troubling beginning to the week as they continue the downward slide they have been on since the beginning of this year.
Juthica Chou, the head of OTC options trading at Kraken, stated to CNBC “It’s possible that macro economic concerns, such as the Fed’s response to inflation rates, have facilitated more de-risking activity in general.
“The recent price drop, coupled with high volatility, could be leading to further selling as participants look to reduce risk.”
$130 billion wiped off crypto markets in 24 hours as bitcoin, ether drop to multi-month lows https://t.co/dpyAgYnPMq
— CNBC (@CNBC) January 24, 2022
Looming issues regarding the possible regulation of the notoriously unregulated currency are also plaguing Bitcoin and other digital currencies. Last week, Russia’s central bank proposed a total ban on using and mining cryptocurrencies, according to CNBC.
Vijay Ayyar, Luno’s vice president of corporate development and international expansion says that Bitcoin may be going a bit lower.
Considering the uncertainty in the world right now, coupled with regulation fears, Bitcoin may well hover around $30,000-$32,000 range. He added that if it stays above $30,000 for as long as one week, that might form a base before the market eventually goes higher. But he believes that it may be some time before it will become bullish given current circumstances.
Analyst John Roque of 22V Research told CNBC that bitcoin could plunge even below the $30,000 threshold, saying that he too has been using that as a target but admits that the median historical bear market for the cryptocurrency is down 78%.
Inflation, which is again hitting highs set several decades ago, is also wreaking havoc, putting the lie to the belief that Bitcoin is itself a hedge against inflation.
As Bitcoin gathered additional interest from all fronts in 2021, there are now more short-term investors in the cryptocurrency market who value bitcoin like a tech stock. CNBC notes that analysts state there is widespread concern that a more hawkish Federal Reserve just might finally take some of the cachet from the cryptocurrency.
Leah Wald, the CEO of digital asset investment manager Valkyrie Funds, states “Looking forward, our most immediate concern is how equities markets respond to this week’s Fed meeting, especially after having just endured their worst week since the global onset of Covid.
“A consolidation in stocks would lead to a risk-on environment where traders are more willing to take on additional risk assets such as bitcoin,” she added, “since digital assets have become increasingly correlated to equities as more companies continue to add bitcoin to their balance sheets. Volatility is likely to be a feature of bitcoin for at least the short-term, as traders figure out where market sentiment is following this week’s Fed meeting.”