By CHRIS ILLING
ACCORDING to experts, the cryptocurrency Bitcoin is entering its lowest and darkest market phase. The price of Bitcoin fell to its lowest level since December 2020 on Wednesday, and even hit $20,000 for a short time. The oldest digital currency was trading at around $20,500 on Friday, June 17.
The most important reason for the price drop in the past few days was the inflation data from the US. Published last week, this fuelled expectations of an accelerated increase in US interest rates. Since then, the US dollar has appreciated sharply, bond yields have risen, and stock prices have plummeted worldwide. Bitcoin had previously hovered around the $30,000 mark for weeks. Investors are also continuing to stay away from riskier assets, which is reflected in the stock markets as well.
In addition, renewed internal problems in the crypto market are also driving the Bitcoin price. The Terra crash shook the entire crypto market, and there are now problems within a single crypto company again. The crypto credit centre, Celsius Network, announced on Thursday that “all withdrawals, swaps and transfers” between accounts will be paused. The reason for this is the current market turmoil.
On Friday, Babel Finance temporarily suspended the withdrawals and redemption of crypto assets.This came as the crypto lender scrambles to pay its clients after the recent slump in the digital currency market.
Last Thursday’s Federal Reserve meeting was eagerly awaited. The US central bank decided to raise interest rates by 75 basis points. The fear in the market is currently great, because concerns about an even more aggressive approach by the Federal Reserve are influencing prices on the stock exchanges and on the crypto market.
The fact that bargain hunters are still absent speaks of a continued sell-off. Volatility could be pronounced, especially over the weekend. A clear slide below the psychological $20,000 mark should lead to new turbulence in the crypto markets.
Bitcoin fell as much as 8.7 percent to $20,050, marking its lowest level in a year-and-a-half. Ethereum lost almost 15 percent at the top to $1012.68. Both digital currencies depreciated by up to 27 percent compared to the previous week’s close.
The Crypto Crash is being compared with the Tulip Crash in the 16th century. The rare tulips were considered luxurious. Since there were never enough, prices rose and so did speculation fever. The rarer a tulip variety was, the more expensive it became. The prospect of great wealth without work also fuelled events. In the hope of quick profits, more and more speculators jumped on the moving bandwagon.
But then the speculative bubble burst. At the peak of the tulip bulb boom, the first speculators got out to secure their profits. Suddenly there was a sales panic. Prices plummeted and the tulip bubble burst like a balloon.
But it is not only crypto companies that are experiencing tumultuous times. Start-ups, e-commerce ventures and Fintech companies have seen their valuations ripped apart. The ‘dot-com’ bubble in the early 2000s represents one of the worst crashes in history. And this bubble is also being compared to the new technology sell-off. Between 1999 and 2001, the ratings of many Internet companies collapsed. That resonates to this day. So far, the technology-heavy NASDAQ has lost almost 32 percent year-to-date. The fall of the Nasdaq, which comes after several months marked by records, makes some say that we are in a technology bubble which is about to burst, while others believe it is just an inflatable balloon which is deflating. The sell-off is happening everywhere, from Big Tech to Cloud companies and e-retailers.
It looks like history is repeating itself, and the excessive speculation in companies and assets without a track record of profits, solid business plans and flimsy products is starting to backfire.