Bitcoin and Ether hit their respective new all-time highs in November 2021, but things appear to have only spiralled for the worse since then. Bitcoin and most major altcoin have been selling off as crypto investors eye the prospects of interest rates in the US marching higher, faster, and more aggressively than most had expected just a few months ago. In fact, according to CoinMarketCap data, Bitcoin's current market cap of $665 billion (roughly Rs. 50,56,000 crore) is down from almost $1.3 trillion (roughly Rs. 1,00,00,000 crore) in November 2021, while the wider crypto market has shed over $1 trillion (roughly 70,00,000 crore) over the same period.
According to reputed wealth management firm Bespoke Investment Group (via Bloomberg), there have been larger percentage drawdowns for both Bitcoin and the aggregate market, but the crash over the weekend marks the second-largest ever decline in US dollar terms for both.
The cryptocurrency rout comes as investors have dumped shares in tech companies on expectations the US Federal Reserve will move to rein in loose pandemic monetary policy to combat inflation. The most recent price plunge comes as the Federal Reserve also takes baby steps towards potentially launching a US digital currency, akin to electronic cash that would be backed by the central bank. On Friday, the Fed released a long-awaited report exploring its options.
The report reached no conclusive answers, instead wading into the pros and cons of any decisions. That's in keeping with the Fed's slow movement on issues around digital currencies, even as other central banks experiment with their own versions.
Global stock markets posted their biggest declines in more than a year this week, with the fast-growing companies that powered the rally from the depths of the coronavirus crisis enduring intense falls.
The sharp sell-off in digital assets also came a day after the Russian central bank announced draft proposals seeking to ban all cryptocurrency trading and mining. The proposed regulations would also block cryptocurrency investment by banks and forbid any exchange of cryptocurrency for traditional currencies in Russia, one of the world's largest centres for crypto mining.
The central bank said in its 36-page report that the rapidly rising value of cryptocurrencies "is defined primarily by speculative demand for future growth, which creates bubbles," adding they "also have aspects of financial pyramids, because their price growth is largely supported by demand from new entrants to the market." The announcement initially had little impact on Bitcoin, but the popular crypto asset dropped more than 10 percent on Friday from the previous day's high to hit its lowest level since August.
Interested in cryptocurrency? We discuss all things crypto with WazirX CEO Nischal Shetty and WeekendInvesting founder Alok Jain on Orbital, the Gadgets 360 podcast. Orbital is available on Apple Podcasts, Google Podcasts, Spotify, Amazon Music and wherever you get your podcasts.
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