Bitcoin bounces back but the crypto turmoil isn’t over
The cryptocurrency market stabilized Thursday, with bitcoin climbing back above $40,000. Even so, the world’s largest digital currency has lost more than 30% in market capitalization since its peak in mid-April.
The wider crypto market looks similarly bruised.
Several digital currencies are still showing double-digit percentage losses from where they were before the latest turmoil. And all the crypto bloodletting points to a big warning: invest at your own risk.
Since May 12, the global cryptocurrency sector has lost more than 30% of its total market value, according to data from CoinMarketCap. By Thursday morning, the world crypto market value had fallen to nearly $1.8 trillion, down from more than $2.5 trillion just last week.
This week’s steep selloff came on the heels of China cracking down on cryptos. In response, bitcoin tumbled to just above $30,000 as digital currencies across the board sold off.
But investors shouldn’t be surprised about the volatility, William Quigley, managing director at crypto-focused investment fund Magnetic said on the CNN Business digital live show Markets Now Wednesday. Cryptos are still a relatively new asset, Quigley noted, and are therefore far less predictable than more traditional investments.
“Keep in mind as well, we all tend to focus on day-by-day, week-by-week. But that’s not how most people buy cryptocurrencies, or even stocks,” Quigley said.
Meanwhile, ethereum co-creator Vitalik Buterin told CNN Business that he believes cryptos are in a bubble. And it’s hard to tell when bubbles will burst.
Then again, the momentum could keep building: Since the start of the year, ethereum and joke-turned-crypto dogecoin have increased in value nearly 290% and more than 8,000% respectively — even after accounting for the recent rout. Bitcoin is up more than 40% in that time frame, according to Coindesk data.
Ups and downs
Bubble or not, the crypto landscape looked to be on the road to recovery Thursday.
“The bigger the drop, the higher the bounce,” Fawad Razaqzada, market analyst at ThinkMarkets, said in a note.
Bitcoin is up some 18% and was at more than $41,900 early Thursday. Ethereum rose 22% to around $2,900.
“But it remains to be seen whether the recovery will hold,” Razaqzada added. “Cryptos will likely stay volatile for a while as speculators weigh the impact of China’s ban and Tesla’s U-turn against the recent growth in institutional interest.”
Tesla, which in February announced a $1.5 billion investment in bitcoin and said customers could use it to pay for its cars, walked back the latter decision last week, citing the environmental impact of bitcoin mining.
Strategists at JPMorgan said earlier this week that institutional investors are pivoting out of cryptos and back into gold, although it wasn’t yet clear why.
