Bitcoin’s Brutal Crash: Worst Month Recorded

Bitcoin is no stranger to wild price swings but the past month has set a new record and with the worst 30 day period the cryptocurrency has ever experienced.

In dollar terms, Bitcoin has never fallen this low so fast. Over the course of four weeks Bitcoin has lost around USD 25,400 in value and wiping out a massive USD 500 billion from the market cap.

It has been a month of panic and pain. But there appears to be a pattern unfolding that has caused this crash and it appears to be tying into global markets, political risks, rising leverage and a broader financial reshuffle.

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While Bitcoin has fallen further in percentage terms in the past this 23% decline this month makes the largest absolute dollar drop in the asset’s history. This comes after Bitcoin surged to an all time high of USD 125,000 in October caused by ETFs and the self-declared “first crypto president,” Donald Trump.

But the momentum flipped quickly. Multiple news cycles hit the market hard causing a massive sell off. Leveraged traders were among the first casualties. As independent economist Saul Eslake explains, many recent buyers borrowed money to accumulate positions which than were amongst the first to collapse when the price dipped.

Margin calls triggered forced selling, which then triggered more margin calls, cascading through Centralised Exchanges (CEX) and ETFs.

According to Deutsche Bank analysts retail investors may have even had to offload traditional assets like shares and bonds to cover losses impacting the broader financial market and mainstream investments and shares.

Bitcoin: No Longer an Alt Investment

Early Bitcoin investors bought into the token in the belief that it provided financial freedom and was an asset or payment system that sat outside the current economic and financial markets. An alternate currency that wasn't controlled by big banks, governments and not impacted by the financial markets.

A belief in that the asset was completely decentralised.

However, fast forward to today and the complete opposite can be said about Bitcoin and all the major cryptocurrencies now in circulation with many sitting in everyday investment portfolios and openly shared and traded at the stock market. Bitcoin has been now accepted and included into the mainstream and with it, it loses it's decentralisation and is reliant on investment markets and reacts to the broader financial and economic world.

This can be attributed to the fact that the current sell off was triggered in part by broader weakness across financial markets, amplified by nervous speculation that the US Federal Reserve might pause future interest rate cuts. Traders had priced in a December rate cut. Now, uncertain inflation and political pressure are making it hard to see the U.S Fed’s next move.

Bitcoin has just become a high stakes/risk asset much like Platinum once was, except at a larger, faster and for those who play. More painful way of doing it.

image sources provided supplmented by Canva Pro subscription. This is not financial advice and readers are advised to undertake their own research or seek professional financial services.

Posted Using INLEO