Bitcoin and ethereum prices fall from recent new highs, some altcoins soar
Yahoo Finance reporter Jennifer Schonberger breaks down the latest price action in the cryptocurrency space.
ALEXIS CHRISTOFOROUS: Welcome back, everybody. Bitcoin fell to a one-month low here today and is headed for its worst week in six months. It looks like traders are booking profits after a pretty long rally. Here to talk about it is Yahoo Finance’s Jennifer Schonberger. So Jen, what was sort of the driving force, you know, for so many investors to head for the exits when it comes to crypto?
JENNIFER SCHONBERGER: Good afternoon, Alexis. Cryptocurrencies taking it in the chin this week, with Bitcoin looking to barely dodge falling for a fifth straight session. After hitting an all-time high just nine days ago, Bitcoin almost touched into a bear market Thursday, falling nearly 20% to hit 55,000 and change before coming back a bit today in the session. Of course, a bear market defined as a 20% drop from the most recent all-time high.
Ethereum, the second largest cryptocurrency measured by market capitalization, down nearly 10% this week, since hitting an all-time high back on November 10th, just like Bitcoin. Both cryptocurrencies getting clobbered, even as inflation has continued to soar to a 30-year high and as global markets appear to be taking a more cautious stance as COVID cases rise, which could dampen economic growth.
Caitlin Long, CEO of Avanti Bank, which is a cryptocurrency bank based in Wyoming, tells me that there’s been some instability in stablecoin prices, which is making traders a bit nervous, and that could be translating into the rest of the cryptocurrency space. She says we shouldn’t be surprised, though, by the amount of volatility that we’ve been seeing, as it is inherent for cryptocurrencies, and that the introduction of that Bitcoin futures ETF hasn’t exactly led to a reduction in volatility, as many traders and others had hoped.
Analysts also say there’s been some profit taking as traders look to book gains, but there’s evidence that hedge funds are looking to trade out of Bitcoin into some of those smaller altcoins. And that may be behind some of the drop that we’ve seen in Bitcoin and certainly bodes for perhaps less market share for Bitcoin going forward.
Take a look at Bitcoin’s performance versus some of the smaller altcoins since May 1st. You’ll see that Bitcoin has fallen 3% since then, but Ethereum up 134%, Solana better than 1,300%, Axie Infinity up better than 1,100%, Binance Coin better than 120%. So you’re getting the picture there, Bitcoin versus these altcoins.
Now, looking ahead, crypto markets tend to follow that four-year cycle of Bitcoin, which includes a halving every 210,000 blocks. So Caitlin Long tells me if that trend does hold, then the bull market that we’ve seen in crypto this year may not last much further than the first quarter of next year. Alexis.
ALEXIS CHRISTOFOROUS: Wow, you know, Jen, one of the other things, of course, that investors are a little skittish about is that provision in the infrastructure bill, which is now a law, that is stipulating that those dealing with cryptocurrency are going to have to disclose things to Uncle Sam. The IRS is going to have to know about it, right?
JENNIFER SCHONBERGER: Yeah, absolutely, Alexis. That could be weighing on the space as well. But I think that folks should keep in mind that is that crypto, as it becomes a more mature asset class, it’s going to have regulations. It’s going to have to comply with IRS requirements, right? Everybody has to pay taxes. And so we’ll get through this. There could be a period of volatility. But it’s something that is inherent as this looks to become a mature asset class.