Some fear that the worst is yet to come as investors reel from the sharp sell-off in digital currencies.
The world's largest virtual currency dropped below $33,000 on Monday, its lowest level since July. It recovered back above the $36,000 mark, but is still down from a record high of nearly $69,000 in November.
Since the all-time high of the digital currency, the entire market has lost more than $1 trillion in value. Since reaching its peak in November, ether has halved in value and solana has plummeted.
Some investors in the digital currency market are talking about the possibility of a "crypto winter", a phrase referring to historic bear markets in the market's history. The most recent occurrence happened in late 2017, when the price of bitcoin crashed as much as 80% from all-time highs.
David Marcus, who was the former head of cryptocurrencies at Meta, appeared to admit that a winter had already arrived. He said on Monday that the best entrepreneurs build the better companies during the winter. This is the time to focus on real problems.
The market is in a cooling off period, but the chief operating officer of L&Atelier isn't sure if a winter is on the way.
A lot of developers seem to have been distracted by the easy gains from speculation in NFTs and other digital assets. A cooling off period might be an opportunity to start building the fundamentals of the market.
The slide in global stocks has come in tandem with the decline in the price of cryptocurrencies. Digital assets are becoming more intertwined with traditional markets because of the involvement of large institutional funds.
The S&P 500 has fallen 8% since the start of the year, while the tech-laden index is down over 12%. The correlation between the performance of the S&P 500 and that of bitcoin has increased recently.
The Federal Reserve's monetary tightening and interest rate hikes could drain the market's liquid assets. The end of the era of ultra-cheap money and sky-high valuations could be in sight if the U.S. central bank makes such moves in response to surging inflation.
I think it is related to the decline of risky assets as a whole.
Stable coins, or digital currencies that track the value of the U.S. dollar, have been helped by the lower prices of major digital coins. According to data from CoinGecko, the second-largest stable coin has added $5 billion in market value since Sunday.
The vice president of corporate development and international at Luno thinks that the recent slump in the market is more of a correction than a downturn.
He said that before diving 80% or more,bitcoin has seen blow-off tops. A chart pattern shows a steep increase in price and trading volume followed by a sharp fall in price.
Ayyar said that correction for BTC is usually in the 30 to 50% range.
He says a key level to watch is $30,000. He said that if it closes below that point in a week or more, it would mean a high likelihood of a bear market. A decline of 80% from the recent peak would mean a price of less than $15,000. Ayyar does not believe that a scenario is on the table.
The investors are concerned about the possibility of more regulation on the industry. Last week, Russia's central bank proposed banning the use and mining of cryptocurrencies, similar to a move from China. The U.S. government is about to release a strategy to regulate cryptocurrencies.
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