Cryptocurrency Market Wipes Out $2 Trillion in Value Since November Peak

Bitcoin 2022 Conference

The cryptocurrency industry has wiped out about $2 trillion in value since hitting a $2.9 trillion peak in November 2021.

All of the major digital tokens are deep in the red this year. Bitcoin has slumped more than 53 percent to around $22,000. Ethereum has lost 68 percent to about $1,200. Cardano has plunged 65 percent to below 50 cents. Dogecoin has collapsed 68 percent to roughly a nickel. Litecoin has cratered nearly 70 percent to under $50.

Bitcoin and its crypto peers could be leading the financial markets lower, suggesting that virtual currencies might be serving as a measurement of investors’ overall risk appetite.

Whether Bitcoin is joining the broader market meltdown or acting as a gauge of investor sentiment, analysts agree that it is clear today’s environment is weighing on the crypto ecosystem, too. Recession fears, surging inflation, the military conflict in Eastern Europe rages on, China’s plethora of economic challenges, and rising interest rates are all factors driving traders’ movements in 2022.

The global economy has metastasized into an uncertain environment now that central banks are tightening monetary policy to combat inflation.

If there is one thing that investors do not value, it is uncertainty, volatility, and unpredictability, says Moe Vela, a former senior advisor to former Vice President Al Gore and then-Vice President Joe Biden.

“All of a sudden when times are tough and inflation is high and economic instability in some ways right around the world, investors become nervous. They become much more risk-averse,” Vela told The Epoch Times.

With the latest developments unfolding in the cryptocurrency industry, institutional investors and armchair traders could become even more frightened of the space until conditions settle down, analysts warn.

Last month, stablecoin LUNA, the native cryptocurrency of the Terra Ecosystem, collapsed 99.9 percent. Crypto lending platform Celsius announced Sunday that it would be suspending all withdrawals amid “extreme market conditions” and liquidity stabilization efforts.

Coinbase, one of the world’s premier cryptocurrency platforms, announced it is laying off 1,100 employees in response to the latest turmoil.

Crypto exchange Binance confirmed Monday that it had temporarily suspended withdrawals “due to an earlier batch of transactions getting stuck from low transaction fees submitted.”

But the key driver of the crypto selloff has been the Federal Reserve raising interest rates. This was the catalyst of the steep crash in the market, says Jay Hatfield, chief investment officer at Infrastructure Capital Management.

“The Fed’s overexpansion of its balance sheet led to a number of bubbles including tech stocks, (and) crypto tokens,” he wrote in a note.

“We believe overvalued momentum investments such as meme stocks, SPACs, money-losing tech stocks and cryptocurrencies will continue to remain under pressure in 2022. In addition, we see the trend of investors rotating out of these higher risk investments and into safer allocations continuing, and that dynamic exacerbates sell-offs of these riskier investments.”

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Picture: Marco Bello/Getty Images

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