Though a 50% drop in value is an infrequent effect in equity markets, bitcoin and other cryptocurrencies are experiencing their 2d drawdown of that magnitude in the by yr as run a risk avails are getting pummelled during the first calendar month of 2022.

Long-term holders of the coin are no strangers to these drastic swings in cost, as evidenced by a long-term view of its price chart.

Nevertheless, the past yr, in item, has been full of highs and lows for bitcoin and cryptocurrency markets in full general.

Spring collapse

Subsequently trading betwixt $l,000 and $60,000 for several weeks between mid-February and early May 2021, several factors led to the slump in the coin's value. On May 12, 2021, Elon Musk tweeted that Tesla will no longer accept bitcoin for car purchases due to ecology concerns.

Presently subsequently, Chinese regulators tightened restrictions, banning fiscal institutions and payment companies from providing services related to cryptocurrencies. This would exist a precursor to the land'southward ban on trading and mining later in the twelvemonth.

Enthusiasm lifts price

Despite these hurdles, bitcoin bottomed two months later on and once over again began its ascent. By the fall, cryptocurrency and blockchain enthusiasm had reached a fever pitch.

OpenSea, a marketplace for nonfungible tokens, otherwise known as NFTs, had its highest volume month for the year, with sales reaching $3.4bn. Projects such equally Bored Apes and CryptoPunks saw surges in their price, with some fifty-fifty selling for millions of dollars.

Adding to the enthusiasm was the launch of a bitcoin futures ETF, the ProShares Bitcoin Strategy ETF (BITO), which gathered over $1bn avails under management (AUM) within the first two trading days.

The timing of this ETF's launch, forth with competitors Valkyrie Bitcoin Strategy ETF (BTF) and VanEck Bitcoin Strategy ETF (XBTF), marked a elevation. The cryptocurrency's value has been falling ever since.

Volition history repeat?

Though a drawdown of this extent is not unheard of for bitcoin, the launch of the ETF and cryptocurrency'south growing acceptance by the financial community means this might be many investors' first sense of taste of the wild price swings in bitcoin's value.

These dramatic price shifts can piece of work both ways. At the time of writing, bitcoin appreciated by 7.iv% in the prior 24 hours.

Nearly of this price appreciation happened within a bridge of a few hours rather than existence a steady climb over that 24-hour menstruum.

Another data point that might calm new crypto investors is looking at historical price action. The price of bitcoin has e'er recovered from drawdowns of this magnitude, ofttimes reaching record highs soon after.

Time volition tell

While this thought might bring comfort to those new to investing in cryptocurrencies, this upshot is past no means guaranteed. Simply those who remember history will non repeat itself are tasked with answering why this time is different. Given the shifting nature of the macro and economic properties, detractors have no shortage of things to betoken to.

Inflation is college than it has been in decades. The Federal Reserve is poised to begin tightening, with many blaming loose monetary policy for a bubble in risky assets similar cryptocurrencies. And bitcoin'southward long-awaited entry into the US-listed ETF space could have signalled a cap on pulling new investors into the space.

But bitcoin has risen exponentially to a higher place many hurdles in its past, surprising naysayers for most of its history. In some means, its demise could be more surprising than an eventual recovery to new all-fourth dimension highs.

This story was originally published onETF.com

Related articles

  • Volition crypto ETPs bank another yr of blockbuster growth in 2022?
  • ETF issuers cannot beget to avert cryptocurrency market place any longer
  • Could cryptocurrency and ESG become the new norm?

Have you lot seen our new ETF information tool?

Merely click on any of the ETF links in the article above and you will get access to a whole host of data including:

  • Historical Operation
  • Sector and country weights
  • Portfolio assay
  • Similar ETFs

Powered by: ETF Logic

Please note: The tool is provided by ETF Logic who shall process your personal information in accordance with their privacy policy.