Bitcoin continued to fall on Wednesday, extending a strong sell-off in cryptocurrency prices.
In the afternoon, bitcoin trading traded at $ 21,552, according to CoinMarketCap, a drop of nearly 70% since the digital currency hit an all-time high of more than $ 67,000 last November. Analysts say the price has fallen as investors abandon the highly volatile cryptocurrency to more stable assets.
Bitcoin and other cryptocurrencies rose last year as a growing number of Americans tried their luck, attracted by the breathless media coverage and reports of huge returns that some investors had achieved. But now that the Federal Reserve is raising interest rates in order to combat rising inflation, the crypto’s meteoric rise is beginning to plummet back to Earth, said crypto-skeptic Ben McKenzie.
“Bitcoin only exists in a low interest rate environment,” McKenzie told Dan Patterson of CBS News. “It’s pretty painful to see, but I guess that’s serious for you.”
Investors began to attack cryptocurrencies this spring, with confidence in the industry further undermined when terraUSD and luna stablecoins lost their reference value of $ 1. And sales skyrocketed earlier this week when cryptographic platforms Binance and Celsius stopped operations.
The defeat has been wide and deep, with the value of ether, solana, tether and other important tokens following bitcoin down. The total market value of cryptocurrencies fell below $ 1 trillion on Monday to $ 983 billion, the first time it has fallen below that mark since January 2021, according to CoinMarketCap.
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Most bitcoin buyers jumped on the bandwagon last year as the popularity of cryptography skyrocketed, McKenzie said. Since then, many are likely to have lost money, the research suggests. A May analysis by cryptocurrency firm Glassnode found that 40% of all bitcoin holders have lost money.
Some Wall Street analysts are skeptical that cryptocurrencies will regain momentum anytime soon. Oanda senior market analyst Craig Erlam said in a research note on Wednesday that bitcoin prices are likely to continue to fall as interest rates rise.
“Bitcoin doesn’t feel love right now, and I’m struggling to imagine a scenario where that changes,” he said. “There may still be a belief that bitcoin may thrive in the future, but something it now offers just beyond speculative rallies will continue to struggle. What once seemed like solid support below $ 20,000 suddenly seems very much unstable “.
Critics argue that the extreme volatility of cryptocurrency undermines its use as an investment and reserve of value. Microsoft co-founder Bill Gates is among the doubters.
“I like investing in things that have valuable results,” he said Tuesday at a TechCrunch event in California. “The value of cryptography is just what another person decides that someone else will pay for it.”
– Dan Patterson of CBS News contributed to this report
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