The price of Bitcoin, the first cryptocurrency and the main one by market value, is located around 43,000 dollars at the time of writing this note. This means that compared to a historical maximum of 68,925 dollars on November 10, it accumulates a loss of 37.61% in less than three months!
Whoever bought Bitcoin excited by the streak of three consecutive historical maximums, assuming that he still maintains that investment, today would have a loss of more than 25,925 dollars (about 526,000 pesos for each unit if the official exchange rate of the Bank of Mexico is taken into account. of Friday).
The previous example seems distant for most small investors, but it helps us measure the destruction of value that occurred in that short period. After all, one of its main characteristics, that of being decentralized and moving only by supply and demand, hits it today.
The International Monetary Fund (IMF) warned this week in a study that Bitcoin moves increasingly in line with the performance of the stock markets. Beyond finding a valid correlation, the salient element of this idea is that cryptocurrency is no longer considered a haven for value.
At the moment the situation is as follows: the stock markets remain stable, after the December inflation data in the United States and the moderate tone of the speech of Jerome Powell, chairman of the Federal Reserve, in front of the Senate, gave something rest to the markets.
However, with consumer prices at multi-decade highs and pending US interest rate hikes, sentiment in the market is fragile. Added to this is a context of growing Covid-19 infections by Ómicron that threatens to hit the economy.
falls in the markets
As a risky investment, thanks to Bitcoin’s high volatility, the price is particularly exposed to changes in investor sentiment. The S&P 500 index of Wall Street, of the 500 most important companies, loses almost 3% in the month; the technological Nasdaq, 6 percent.
As for Bitcoin, it recently faced significant psychological support and at times came close to losing it as it hit a low of $39,677 on Monday, Jan. 10. Although it bounced that same day, on social networks some operators estimated that it could yield to 20,000 dollars.
Only in December Bitcoin had a fall of more than 18% to which it already adds another 6% in January. “Crypto assets are no longer on the fringes of the financial system,” explained Tobias Adrian, financial advisor and director of the IMF’s Monetary and Capital Markets Department in the report.
Risk to the system?
According to some analysts, the huge revision of prices due to expectations of increases in interest rates by the Fed is the factor that has most impacted the prices of assets perceived as riskier. Among the falls, those of Bitcoin and meme stocks are the most considerable.
The IMF report added that volatility and relatively high valuations, as well as swings in the price of crypto assets could soon pose financial risks. The market value of cryptocurrencies has increased almost fourfold since 2017 to nearly $2 trillion.
However, its main characteristic, that of offering protection against inflation, continues to be an element of interest in the current context of high prices. And institutional adoption of cryptocurrency, which is accelerating, supports persistent retail investment interest.