The months-long decline of cryptocurrencies Bitcoin and Ethereum accelerated Monday morning with prices dropping to six-month lows.
A crisis of confidence in the crypto market is inducing the sell-off of major cryptocurrencies, wiping out more than $1 trillion in value from the market since November.
The largest cryptocurrency Bitcoin was trading down almost 9 percent, its lowest since July 23, as it approaches a new $30,000 threshold, while the second-largest digital coin Ether fell 13 percent, its lowest since July 27.
“Crypto is volatile in the short term – that’s something we’ve all come to accept,” said Ola Doudin, CEO & co-founder of BitOasis.
“We’ve seen the Bitcoin price hit all-time highs and record big drops, all in the last few months. This time around it’s the proposed ban on crypto operations in Russia, along with a tightening of monetary policy by the US Federal Reserve, that’s driven crypto prices down,” she added.
Alongside the Federal Reserve’s hawkish stance and fears over a crypto mining and trading ban in Russia – the third-largest Bitcoin mining hub in the world, the Wall Street sell-off and Bitcoin’s growing correlation with traditional markets are also contributing factors, according to Nadine Azzam, head of MENA at Vantage.
However, crypto experts are urging patience to ride out the volatility storm, signalling for investors to carefully assess the current slump in prices which are presenting an opportunity to “buy the dip”.
“For many crypto investors the current slump is seen as an opportunity to get Bitcoin exposure at lower prices… retail investors who invest more out of disposable income see this more as an opportunity to accumulate at lower levels, hence the recent rise in the number of new Bitcoin addresses,” explained Matt Dixon, CEO and founder of Eva.io.
“High prices of Bitcoin may have been seen as a blocker to crypto adoption by newcomers, whereas the lower prices we are now experiencing are seen as an opportunity to begin accumulating this exciting new asset class,” he added.
“Taking money out of the market and re-entering when the market is poised to take off is a solid strategy to secure your returns,” said Azzam.
The crypto market is known for going through volatile cycles of correction – an occurrence that is anticipated by seasoned investors but worrisome to the average one. After touching the $3tr mark in November last year, the past week witnessed one deep correction with double-digit declines.
While the crypto market has endured periods of volatility, various restrictions, bans, and adverse regulatory actions over the past few years, interest in crypto continues to skyrocket.
“The current market volatility is not new to the sector having played out on many occasions and is a natural cycle within an emerging asset class. Whilst the crypto market has a reputation for being volatile it has also proven to be resilient in the face of external forces such as Covid and regulatory challenges,” said Dixon.
“Investors, major companies and even countries are rapidly recognising that Bitcoin and cryptocurrencies have a big part to play in the future of finance and commercial enterprise, so the bigger picture remains very positive as the market continues its journey to maturity,” he added.
Increased participation from institutional investors and traditional financial institutions is also driving the trust and scale for the crypto economy, helping the market mature faster, shared Doudin.
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