Bitcoin down more than 54% in just 6 months as traders panic
Bitcoin's key technical indicators suggest that the currency may continue to lose more ground financially in the near-to-mid term.
- The total market capitalisation of the crypto industry has slipped from AUD$2.59 trillion to $2.1 trillion over the last 72 hours.
- Since the start of 2022, the digital asset sector has showcased an extremely high level of correlation with the traditional stock market.
- Bitcoin's market share currently stands at 41.5%.
Bitcoin (BTC) has been in a state of complete freefall recently, with the flagship asset recording losses in excess of 17% over the past week alone. At press time, BTC sits trading at AUD$44,820 which indicates a loss of 54% since its all-time-high price of $93,482 in November 2021.
As part of the ongoing turmoil, the BTC/USD pair dipped below the AUD$43,000 (US$30,000) threshold for the first time in over 10 months. On-chain data suggests that an increasing amount of panic is beginning to grip retail and institutional investors. More and more BTC is making its way back to various centralised exchanges, suggesting that investors are looking to cut their losses by offloading the asset.
Between 6 and 9 May, the total amount of Bitcoin that made its way onto 21 of the world's most popular cryptocurrency trading platforms stood at 37,537 BTC. CryptoQuant's head of marketing Ho Chan Chung stated that these actions were largely being facilitated by whales — accounts holding more than $1 million worth of crypto — to put more "downward pressure on the price of BTC".
Crypto's correlation with TradFi remains extremely high
Even though many pundits have pushed the narrative that BTC is a hedge against the turmoil experienced by the traditional finance (TradFi) sector, the digital asset (alongside the crypto market at large) has continued to showcase an extremely high level of correlation with the stock market all through 2022.
Technically speaking, the crypto and TradFi markets have moved in tandem recently. Dow Jones recently rose by 500+ points only to dip back down again shortly after, much like how BTC has done over the past couple of weeks.
A similar scenario has also been witnessed in relation to the Nasdaq, S&P 500 and ASX since the start of the year. All 3 markets registered losses of 26%, 17% and 7% respectively. These dips correlate with BTC's poor performance over the course of 2022, with the flagship crypto plummeting by approximately 40%.
With the crypto market looking increasingly unstable, thanks in large part to the Federal Reserve's decision to implement 5 more interest rate hikes by the end of the year, the same also appears to be true for the S&P 500. Popular analyst Caleb Franzen recently posted a technical analysis chart suggesting that the S&P 500 could lose another 500 points in the near term. It will be interesting to see how things pan out for the global economy over the coming few months.
Disclosure: The author owns a range of cryptocurrencies at the time of writing.