In another major flash crash of the broader cryptocurrency market, the Bitcoin (BTC) price has dropped to a three-month low! As of press time, the world’s largest cryptocurrency is trading 6.21% down at a price of $43,452 and a market cap of $820 billion.
With this latest price crash, Bitcoin has eroded more than $65 billion worth of investors’ wealth. the recent price correction in the broader crypto market seems to be an outcome of the hawkish comments from the Federal Reserves on Wednesday, January 5.
The U.S. central bank has flagged the possibility of fast interest rate hikes than expected. This led Wall Street to go into a completely bearish zone after a strong start ahead this year. The after-effects of the Fed commentary have been across asset classes including crypto, stock, and precious metals. It has been for the first time that the Bitcoin price has tanked under $43,000 since September 2021.
#Bitcoin briefly fell below $43k for the first time since September before showing a current, mildly encouraging bounce. Both the #SP500, along with #gold, have also tumbled and appear to be quite correlative currently. https://t.co/aiC2rEIZgZ pic.twitter.com/B9hyvwTSDC
— Santiment (@santimentfeed) January 5, 2022
Speaking to Bloomberg, Stephane Ouellette, chief executive and co-founder of crypto platform FRNT Financial Inc said:
“The Fed is hawkish. Knee-jerk reactions in crypto tend to treat them as exclusively risk assets in spite of the longer term trends around inflation, store of value et cetera.”
Bitcoin Enthusiasm on the Downtrend
Bitcoin has been struggling at $47,000 levels for quite a while over the last few weeks. The world’s largest cryptocurrency remains dovish against the broader market expectations of BTC going to $100K levels.
Also, the saggy trading volumes in Bitcoin show that enthusiasm surrounding Bitcoin has been dropping fast. As Bloomberg reports:
After trending lower for months, volume across exchanges clocked in at a mere US$4.8 billion on Tuesday, data from Kaiko compiled by Messari show. That’s down from US$13.1 billion a year earlier, and is well below the one-year average of roughly US$9.2 billion.
Bitcoin’s daily trading volume hasn’t even surged past $10 billion after the last price crash on December 4. Furthermore, the open interest for Bitcoin Futures has also fizzled out. There’s a near 40% drop in the BTC Futures open interest in the last three months.
With trading volumes dropping, the volatility has spiked up as we can see currently in the market.