Bitcoin Mini-Rallies Go Nowhere As Even Bulls See Lost Year

Everyone knows crypto’s been having a tough time of late. Bitcoin’s lost a third of its value this year, and altcoins are faring even worse with prices sliding again Friday. Despite calls within the community — propagated largely over Twitter — to hoard more coins whenever there’s a selloff, market-watchers say to be wary of predictions that call a bottom to the slide. 

Mike Novogratz, the founder of Galaxy Digital Holdings Ltd. who this week issued a mea culpa over Terraform Labs’s imploded stablecoin, noted that some smaller tokens are down 80% from their highs. And should their losses accelerate to the same degree they did in 2018, those coins could lose an additional 70%. 

“My point is picking bottoms is dangerous,” he tweeted. “And if you do scale in slowly.”

Cryptocurrencies have suffered this year, undergoing a dark stretch that’s affected just about every corner of the market. Bitcoin and ether are down 50% each since November, when many coins peaked, while XRP, Dogecoin and Solana have all lost roughly 70%. Shiba Inu is down 80%. And investors are also souring on NFTs and other crypto-centric offshoots.

Bitcoin, the largest digital-asset by market value, dropped as much as 5% to $28,706 on Friday. The S&P 500 dipped 20% below its January peak on an intra-day basis.

It’s all happening as the Federal Reserve, in its attempt to bring inflation back to 2%, raises interest rates and tightens the loose monetary conditions it had put in place to deal with the pandemic. Stocks and bonds have also sold off this year as investors try to figure out whether the central bank’s actions will induce the economy into a recession. 

“The move so far has been correlated to the broader macro market moves,” Mathew McDermott, global head of digital assets at Goldman Sachs, said of the crypto markets.

That hasn’t kept some from saying that now is a good time to buy digital assets at a discount — Twitter is rife with such posts. Nor have predictions ceased, after more than $1 trillion has been erased in crypto-markets value since the fall, that the bottom is in. 

The plunge in prices on May 12, amid TerraUSD’s breakdown, “signaled clear tendencies of extreme and irrational fears,” according to a research note by BlockFi and Arcane Research. Funding rates reached lows not seen since July as liquidations spiked, all while spot volumes remained elevated. “All these events suggest that the current selloff could be nearing a point of saturation,” the report said, though it added that assessing the crypto market without consideration for what’s going on with broader risk assets is “likely unwise.”

Recession or not, crypto prices could have further to fall, according to Mike Belshe, founder and CEO of BitGo. “Even if the economy avoids a downturn, I’m confident that prices will collapse and the exuberance will subside,” he said in an interview. “This would be more pronounced if we enter into a recession.”

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