Thursday, December 1, 2022

Crypto Market Back Under $2T as Bitcoin, Ethereum Tumble

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Key Takeaways

  • The global cryptocurrency market cap has dipped below $2 trillion following another selloff.
  • The market has retraced despite the Luna Foundation Guard’s Bitcoin accumulation and anticipation for Ethereum’s “Merge” to Proof-of-Stake.
  • Macro factors such as the Federal Reserve’s tapering and interest rate hikes have contributed to sluggish activity in the crypto market.

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Bitcoin broke below $42,000 as the market sold off earlier this morning. 

Crypto Market Suffers Dip Below $2T 

The global cryptocurrency market cap has tumbled below $2 trillion yet again. 

The market kicked off the week in the red as Bitcoin, Ethereum, and other assets retraced. Per data from CoinGecko, Bitcoin broke below $42,000 early Monday after a 3.2% dip, Ethereum fell to around $3,050 after a 5.8% decline, and many lower cap coins were harder hit. The Layer 1 networks Solana, Cardano, Polkadot, and Terra were shaken in the recent selloff, bringing the global crypto market cap to around $1.97 trillion. 

The bearish update comes despite the Luna Foundation Guard’s steadfast commitment to accumulating vast quantities of Bitcoin on the open market. The foundation, which was recently established to build reserves for Terra’s UST stablecoin, added to its stash with another nine-figure Bitcoin buy over the weekend and now holds just under 40,000 Bitcoin worth about $1.6 billion at press time. Led by Terraform Labs CEO Do Kwon, LFG’s Bitcoin initiative had sparked some renewed confidence in the market in recent weeks, but the current price action suggests the optimism could have been short-lived. 

The recent volatility has led some traders to share negative short to medium-term outlooks on crypto’s price potential. Former BitMEX CEO Arthur Hayes put out a Medium post today arguing that crypto’s close correlation with stocks would send prices further into the red over the coming months. Hayes called for $30,000 Bitcoin and $2,500 Ethereum by June 2022, but it’s worth noting that he also predicted that Ethereum could trade “north of $10,000” by the end of the year in another post he published 10 days ago.

Downward Trend Continues 

The crypto market is entering its sixth month of sluggish activity. Since the global cryptocurrency market cap topped $3 trillion in November 2021, most assets have struggled to retain their highs amid market exhaustion and macro factors such as the Omicron strain, the Federal Reserve’s tapering and interest rate hikes, and soaring commodity prices due to Russia’s attack on Ukraine. 

Bitcoin and Ethereum have trended roughly 40% down for several months, while the likes of Solana, Avalanche, Dogecoin, and have fared much worse. One exception to the trend has been Terra’s LUNA, which broke a new all-time high of $119 on Apr. 5 as the LFG ramped up its Bitcoin spending. Despite the broader market decline, certain Ethereum NFTs have also seen huge price appreciation in both U.S. dollar and Ethereum terms. 

Besides the Terra developments, one possible catalyst for a market revival is Ethereum’s long-awaited “Merge” to Proof-of-Stake, which Hayes cited as a significant factor for his five-digit prediction. Still, while Ethereum has completed its Merge testnets and is expected to complete the upgrade sometime this year, the launch date is currently unknown. 

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies. 

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