Bitcoin Bounces Back After Falling Below $33,000

Bitcoin rallied on Monday afternoon, trading above $37,000, after falling to a seven-month low in the morning, as the cryptocurrency moved in lockstep with a swift rally in risk assets.

Bitcoin was trading at $36,800 at 5 p.m., up, 4.7% on the day. In the morning, it traded below $33,000 for the first time since July. That extended its selloff to a more than 50% loss from its record high of $68,990.90, set on 10 November.

The drop did not come as a surprise to crypto enthusiasts. It is the eighth time since Bitcoin launched in 2009 that it has fallen by more than 50%, and the third time since 2018. From April through July last year, it fell 52%.

Cryptocurrencies have been swept up in a broad market selloff hitting riskier assets, especially technology companies. The driver, analysts say, is the U.S. Federal Reserve and its plans to pull back stimulus from the economy and raise interest rates. The tech-heavy Nasdaq stock index has declined 12% since the start of the year.

Crypto is a high-growth nascent industry that trades as a risk asset. It is quite dramatic this morning and completely driven by the macro environment, buffeted about by the Fed.

Retail investors also appear to be taking a step back from investing in crypto. The volume of smaller-size transfers, a proxy for retail trader use, declined by over 40% between the first and fourth quarters last year.

This may be because market interest is shifting toward trendier digital assets. Google searches for ‘NFT’, the acronym for non-fungible tokens, climbed steadily all of last year and into 2022. Meanwhile, searches for “bitcoin” fell last June and remained at depressed levels until rising during last week’s selloff.

Some cryptocurrencies have fallen even further than bitcoin. Ether, the second-most popular digital currency, is down 50% from the last record it notched, also in November. Solana, a cryptocurrency that gained popularity last year, has fallen 64% and Shiba Inu, another digital currency based on a meme, declined 74%.

Losses have collectively pulled the overall crypto market’s value down to about $1.65 trillion, a drop of 44% from its November high of $2.97 trillion.