When fear is the primary driver for investors, they pile into dollars, driving down everything else from the S&P 500 to gold — and especially bitcoin.
So much for the argument that bitcoin is viewed as a safe haven investment by institutional or retail investors rather than a game to cash in on crypto’s now battered reputation.
Well off its all-time high of nearly $70,000, bitcoin has recently struggled to hold its head above $40,000, with a growing drumbeat of predictions that bitcoin could fall to $32,000. and possibly below this level, which was the Crash low from May to July 2021.
With nearly every market – from stocks and commodities to crypto – falling on rising inflation fears, Fed Chairman Jerome Powell has warned against more aggressive rate hikes, fearing increasingly that Russia’s war in Ukraine is at least spreading political tensions in Europe and Chinese stocks. With the market collapsing on growing COVID fears after Shanghai went into full lockdown, it hardly comes as a surprise that bitcoin and all but a handful of the top 50 cryptocurrencies are in the red.
But bitcoin was meant to be different. For more than a year and a half, since it began to soar in the fourth quarter of 2000, there has been a steady rhythm of stories that “bitcoin is different.” Kind of like there was a steady rhythm of stories during the internet boom of the late 1990s to 2020 that a ‘new economy’ had been created, causing investors to pump the industry so full of hot air that the inevitable bubble must have burst when the economy turned – or perhaps when the senses returned.
head above water
This strengthening dollar is bad news for bitcoin, cryptocurrency research firm Delphi Digital warned on April 14, stating that “USD strength is one of the biggest headwinds for markets. , including BTC and crypto”.
The dollar has been strengthening since around late June, with the US dollar index (DXY) crossing the 100 mark against a basket of currencies including the euro, yen and pound for the first time in two years on April 12.
This was happening, Delphi added, as bitcoin “struggles to keep its head above” $40,000.
Earlier this morning (April 25), leading crypto industry news source CoinDesk noted that predictions of a return to $30,000 are becoming more common, with some of the most bearish hints that bitcoin could pull back to $20,000. And the “Crypto Fear & Greed Index,” a widely tracked measure of market sentiment, sits at 23 out of 100 — well into the “extreme fear” category.
“I don’t recall this level of decline among contacts and Twitter, even at the cycle low in January,” a fund manager told CoinDesk.
This sentiment is far from the only problem with crypto. Many cryptocurrency-related companies are down substantially, including Nasdaq-listed cryptocurrency exchange Coinbase, which is down more than 50% since its IPO just over a year ago. year – compared to bitcoin, which fell about 25% during this period. And many more, like bitcoin mining companies, three of the largest of which have fallen by up to two-thirds over the past year.
Perhaps equally worryingly, volumes on crypto exchanges have fallen significantly this year – and even during the November boom, when bitcoin hit its all-time high, volumes weren’t close to where they were. at the height of the May boom.
Which suggests that as the get-rich-quick narrative seems to fade, retail investors are turning away.
Reduced but strong
And yet, there are still many more bitcoin and crypto owners than a year ago. The PYMNTS US Crypto Consumer Study, released last week, found cryptocurrency ownership to rise to 23% from 16% in 2021, an increase of over 18 million Americans.
See also: 55% of crypto owners bought it as an investment to make money
And trading volumes – legit trading volumes anyway – are still five times what they were before bitcoin began its climb from $10,000 in November 2020.
So perhaps a better narrative is that frequent crypto traders who impact the daily price of bitcoin and other digital assets are scared. But real bitcoin investors hold their ground.