Investors fear ‘crypto winter’ is coming as bitcoin falls 50% from record highs

Some fear that the worst is yet ahead for cryptocurrency investors as they reel from the sharp drop in Bitcoin and other digital currency.

Bitcoin, the largest virtual currency in the world, fell below $33,000 Monday, its lowest point since July. Although it has since rebounded above the $36,000 mark but is still below its record high of almost $69,000 in November, it remains at its lowest level since July.

The entire crypto market lost more than $1 trillion since bitcoin’s peak. Top tokens like ether and solana have followed the No. The No. 1 digital currency to trade at a sharply lower price. Ether is now worth more than half of its peak value in November. Solana is down 65%.

Some crypto investors are now talking about the possibility that there could be a “crypto winter”, a term that refers to bear markets in the digital currency market’s early history. In late 2017 and early 2018 bitcoin plummeted as much as 80% off its all-time highs, the most recent example of this happening.

David Marcus, former head of crypto at Facebook parent Meta, seemed to admit that a crypto winter is already upon us. He tweeted Monday: “It’s during crypto snows that the best entrepreneurs create the better companies. It is now that you can focus again on solving real problems, not just pumping tokens.

Chief operating officer of the BNP paribas-affiliated tech research company L’Atelier, Nadya Ivanova said that although she isn’t convinced that a crypto winter has yet arrived, the market is currently in a cooling period. She believes that this might not be so bad.

“Over the past year, especially with all of the hype in the market for this product, a lot developers seem to have been distracted from the easy gains from speculation NFTs and other digital assets. Ivanova said that a cooling period could be a chance to build the fundamentals of this market.

The rout in crypto has coincided with a slide of global stocks. Experts believe that digital assets have become more intertwined and connected to traditional markets because of the involvement from large institutional investors.

The S&P500 index has dropped 8% over the past year while the tech-heavy Nasdaq Index is down more than 12%. The correlation between bitcoin’s performance, and that of S&P 500 has been increasing lately.

Traders are concerned that the Federal Reserve could raise interest rates and tighten monetary policy will deplete liquidity in the market. Some analysts believe it will end the era high-value money and sky-high valuations.

Ivanova stated that bitcoin’s recent fall was due to “the rout” and “withdrawal from risky assets overall.”

Stablecoins are digital currencies that track the price of sovereign currencies such as the U.S. dollars and have seen a rise in their value. According to CoinGecko data, USD Coin, which is the second-largest stablecoin has seen an increase in market value of more than $5 billion since Sunday.

Vijay Ayyar is vice president of corporate and international development at crypto exchange Luno. He believes the recent crypto slump is more of an ‘correction” than a prolonged downturn.

He said that Bitcoin has seen a lot of ‘blow-off tops before plunging 80% or more. This is a chart pattern that shows a dramatic increase in price or trading volume, followed by a sharp decline in price.

Ayyar stated that ‘Corrections of BTC typically are in the 30-50% area, which is where currently are, so still within normal correction territory.

He said that $30,000. is the key level to monitor for bitcoin in the future. He said that a drop of around 80% from bitcoin’s recent peak would indicate a bear market. A drop of about 80% from bitcoin’s peak would indicate a lower price than $15,000. Ayyar does not believe such a scenario is possible.

Investors are still concerned about the possibility of regulatory crackdowns on crypto. Russia’s central bank suggested last week that it would ban the mining and use of cryptocurrency, in line with a similar move by China. The U.S. government is reportedly ready to publish a strategy for crypto regulation as soon as next month.