Recent slumping prices follow continued reports of surging inflation, a disappointing December jobs report and the release of minutes from the Federal Reserve Board’s December meeting, which signaled a winding down of measures to prop up what it described as a steadily improving economy. There was also a massive sell-off of Bitcoin futures, CoinDesk reported.
After nearly hitting $52,000 on Dec. 27, Bitcoin has ranged between $33,000 and $50,000 in the days since.
Despite the recent slump, Bitcoin started 2022 on a relative high note, with a strong November and early December that gave way to the recent downward trend. After starting 2021 in the $30,000 range, Bitcoin increased throughout the year and hit its current all-time high when it went over $68,000 on Nov. 10.
The volatility and stalling price continues apace with new economic uncertainty over the Omicron COVID-19 variant, new statements from Federal Reserve Chairman Jerome Powell on the health of the economy, and ongoing comments from U.S. officials like SEC Chairman Gary Gensler on cryptocurrency regulation.
Despite falling back significantly from its latest all-time high price, many experts still expect Bitcoin’s price to rise above $100,000 at some point — describing it as a matter of when, not if. Shortly after Bitcoin’s latest all-time high, Ethereum marked its own new all-time high when its price went over $4,850. Ethereum, too, has seen similar volatility following the latest high.
Prices for BTC last year –
What’s Behind the Latest Bitcoin Drop?
Many investors see Bitcoin’s price swings as part of the game, but “volatility is tough for individual investors to deal with,” Noble says. Like Yang, he warns against selling too fast.
Recent price fluctuation has followed new uncertainty over the country’s lingering fight with COVID-19, new regulatroy acctions by the U.S. government, as well as the new legislation pertaining to crypto in the infrastructure bill. In an industry as new and unproven as cryptocurrency, it doesn’t take much to drive big swings in price. More generally, new short-term investors who are selling their holdings in reaction to the latest drop may be contributing to the drop in Bitcoin’s value, according to the report of glossnade insides, a blockchain analysis firm.
While fluctuations are expected, Noble says he’s been surprised if by drops earlier this year. “I thought the market was maturing and these things would be less frequent and severe. Boy was I wrong,” he says.
Some of this year’s drops have been caused by a combination of factors, Noble theorizes, from excitement about low-quality coins, to negative remarks from Elon Musk, to China recent cracked all investors in BTC.This mix of factors has potential to make sell-offs “all the more violent,” says Noble.
He likens the drop to the stock market crash of 1987, from which the markets took months to recover. But because crypto moves a lot faster today than equities did in the 1980s, Noble says we may see a quicker recovery.
“Don’t panic and puke,” Noble says. “If you keep your positions small, you can try to tolerate the volatility.”