Nearly $12,000 was wiped off the value of Bitcoin over the weekend as investors’ confidence in the cryptocurrency was shaken. Prior to the weekend ‘flash crash’ Bitcoin had enjoyed a total market value of $1.1 trillion but the crypto settled at below $50,000 following the mass sell-off. It comes at a time just after Bitcoin had enjoyed record highs and perfectly illustrates just how volatile the world’s biggest cryptocurrency still is.
It was a bruising weekend for Bitcoin with its value down to reach a lowly $42,000 which is a level not seen since the start of October 2021. Such a fall was intensified by the fact that the crypto had hit a record value of $69,000 in November. What was all the more alarming was the fact that Bitcoin’s value dropped a further 5% on the Monday following the flash crash of the weekend.
The market lost confidence as a result of a resurgence of Covid-19 cases in Europe as well as the threat that the new Omicron variant holds over the world. This was doubled up following a November jobs report in the US that showed that employment levels are taking longer to recover than initially expected.
As such, there has been a noted trend away from riskier assets like cryptocurrencies, plus the lower trading liquidity of cryptos is another big reason behind the fall. This has caused many investors to predict that Bitcoin could have a tougher fourth-quarter compared to what has otherwise been a largely positive year.
Bitcoin started 2021 at a value of $21,493 and now sits comfortably at double that amount. However, it hasn’t been a perfect year with the crypto suffering massive falls in late spring as the US grappled with the Delta variant. Now with fears that the Omicron variant could wreak havoc with the recovery of the economy, there’s every chance that Bitcoin could be one of the new casualties of the virus.
Other cryptos hit by the drop in confidence
Bitcoin wasn’t the only crypto to be hit by the market jitters. Ethereum, the next largest cryptocurrency, also saw its value plummet by 5% to trade at a price of $4,015. Solana was even harder hit with a staggering 9% drop in value, despite many predictions that it could overtake both Bitcoin and Ethereum as a result of its cost-effectiveness and its ultra-fast blockchain technology.
All of which has reaffirmed the perception that cryptocurrencies are simply too volatile to be seen as a serious investment. The sudden price drop will have shocked investors at JP Morgan as the Wall Street bank recently broke ranks to use Bitcoin as a hedge against inflation. However, it’s still worth noting that the cryptocurrency was only worth $320.19 in 2014 and if investors can hold onto the asset despite the momentary volatility, it could still be a shrewd investment.