Prices of cryptocurrencies have also fallen precipitously. Bitcoin’s price fell as low as $ 26,000 on Thursday, down 60% from its November peak, before rising slightly. Since the beginning of the year, Bitcoin’s price movement has changed closely mirrored that of the Nasdaq, a heavily weighted benchmark towards technology stocks, suggesting that investors are treating it like any other risk asset.
The price of Ether has also plummeted, losing more than 30% of its value in the past week. Other cryptocurrencies, such as Solana and Cardano, are also down.
Any panic could be exaggerated, some analysts said. A study by Mizuho showed that the average Bitcoin owner on Coinbase would not lose money until the price of the digital currency fell below $ 21,000. This, according to Mr. Dolev, is where a true death spiral could occur.
“Bitcoin worked as long as no one was losing money,” he said. “Once you get back to those levels, it’s kind of an ‘Oh my God’ moment.”
Professional investors who weathered cryptocurrency volatility also remained calm. Hunter Horsley, chief executive of Bitwise Asset Management, which provides cryptocurrency investment services to 1,000 financial advisors, met over 70 of them this week to discuss the market. Many weren’t selling, he said, because every other asset was down as well. Some were even trying to capitalize on the decline.
“Their point of view is, ‘This isn’t fun, but there’s nowhere to hide,’” he said.
However, the collapse in prices has shocked cryptocurrency traders. Just a few months ago, blockchain advocates predicted that the price of Bitcoin could rise as high as $ 100,000 this year.