bitcoin just ended its worst month on record, losing over 38% of its June value as of Thursday afternoon. Ether, the world’s second-largest cryptocurrency by market capitalization, was down about 47% by the end of the same period.
While the weakness in the digital asset sector is part of a broader risk aversion, confidence in the crypto market in particular has shaken in recent weeks as large companies face a solvency crisis.
In May, the popular US dollar-pegged stablecoin project UST and its sister token, luna, collapsed. $60 billion collective loss calculation. Then, in early June, lending company Celsius, which promised users high returns on digital currency deposits, suspended withdrawals for customers, citing “extreme market conditions.”
Elsewhere, renowned crypto hedge fund Three Arrows Capital non-payment of a loan over $670 million on Monday. And on Thursday sources told CNBC that FTX plans to buy crypto lender BlockFi for $25 million. This is 99% below BlockFi’s latest private valuation, effectively “destroying” the company’s shareholders. according to one source.
“There is still an aspect to crypto that we are waiting to see if another shoe falls, if another institution collapses, if the credit cascade continues,” Matt Hogan, chief investment officer of Bitwise Asset Management, said in an interview. “I think we need to get through the 4th of July weekend and this quiet period in the market before we start building in the second half of the year.”
To some extent, extreme volatility is the price of doing business in the digital asset market. Over the past decade, bitcoin has experienced two extended periods of price decline before recovering. In the previous crypto winter of 2018, Bitcoin lost over 80% of its value before recovering, eventually rising to its November 2021 peak of around $69,000.
But Bank of America’s announcement on Wednesday was pessimistic. Analysts pointed to data suggesting that US consumers are more wary of the cryptocurrency market. Internal customer data shows a more than 50 percent drop in the number of active cryptocurrency users from a peak of over 1 million users in November 2021 to under 500,000 in May, the bank said.
The fall in June was the worst for the cryptocurrency since it first appeared on exchanges in 2010. Over $2 trillion has been wiped from the crypto markets in just a few months, penalizing retail traders who bet big on crypto projects. which have been declared safe investments.
The market capitalization of the crypto market of less than $1 trillion is negligible compared to the capital of the country. $21 trillion GDP or the $43 trillion housing market. But, according to Goldman Sachs, US households own a third of the global cryptocurrency market. Pew Research Center survey also found that 16% of American adults said they invested, traded or used cryptocurrencies.
However, many bitcoin enthusiasts are anticipating another resurgence and are buying at record low prices. Michael Saylor posted on Wednesday what microstrategy bought another 480 bitcoins for about $10 million, bringing the total assets of the world’s most popular digital coin to about $4 billion.
“If your time frame is a week, a month, or even a quarter, I think there is still significant volatility,” Hogan said. “If you have a time horizon measured in years, then yes, this is a great opportunity to think about entering the market.”