Khaberni - In recent weeks, the cryptocurrency markets have experienced a sharp decline, in one of the fiercest downturns in years, amid a growing state of anxiety among investors.
The concern arose as a result of a mass withdrawal from high-risk assets and a decline in bets on an imminent easing of the Federal Reserve's monetary policy, in addition to fears related to the overvaluation of technology companies.
Bitcoin Drop
Bitcoin, the world’s largest digital currency, has fallen by more than 2.1% to fall below the $86,000 level, recording its lowest in seven months at $85,350 during Asian trading, while Ether fell by more than 2% to reach $2,777, its lowest in four months.
In just one week, the two currencies have incurred losses of nearly 8%, a clear indicator of the fragility of global investment sentiment, according to the French station "20 Minute".
Risk Aversion
The analyst at IG Financial Markets, Tony Sicamore, warned that these declines reflect a broad increase in risk aversion, confirming that the continuation of this trend could lead to more severe disruptions in the markets.
According to data from the "Coin Gecko" platform, about $1.2 trillion was erased from the total market value of cryptocurrencies in just six weeks, a figure that reflects the extent of the bleeding the market is experiencing.
The decline was not limited to the currencies themselves, but also affected Bitcoin-related exchange-traded funds in Hong Kong, as their value fell nearly 7%, and the stocks of companies that hold large reserves of digital currencies also fell, with shares of the American company "Strategy" falling 11% during the week to reach its lowest annual level, while the Japanese company "Meta Plant" lost about 80% of its value since its peak in June last year.
Rapid Collapse after a Record Surge
This drop came after an exceptional year during which Bitcoin saw an unprecedented rise to more than $124,000 in October, supported by favorable regulatory changes for cryptocurrencies on a global level.
However, the market has not yet recovered from the major shock it experienced last month, when a sudden collapse led to the liquidation of leveraged financial positions worth more than $19 billion, resulting in a panicked sell-off and severe fluctuations.
According to a report by the CryptoQuant research company, the current market conditions for Bitcoin are "the most pessimistic since the start of the current bullish cycle in January 2023," suggesting that the majority of the demand wave may have already been exhausted.
Is the Situation Really Alarming?
Despite the decline exceeding 28% since the historic peak recorded on October 6, a number of experts believe that these corrections are not necessarily cause for panic.
The chief analyst at eToro platform, Antoine Frays-Soulié, confirmed that this decline is "not unusual" given the highly volatile nature of cryptocurrencies, citing the 2022 collapse when Bitcoin fell from $45,000 to less than $19,000 within a few weeks.
Meanwhile, the CEO of Bitpanda platform, Lucas Enzersdorf-Konrad, explained that what is happening is part of a "normal correction cycle for the end of the year," where investors tend to realize profits, noting that Bitcoin is also affected by global economic conditions, stock markets, geopolitical tensions, interest rates, and inflation.
Risk Limits and Possible Scenarios
Some analysts see the $90,000 level as currently a significant psychological barrier, while others consider $75,000 a critical ceiling that, if broken downward, could lead to a widespread panic-driven sell-off.
Nevertheless, experts agree that the likelihood of a complete collapse of Bitcoin is low, and that medium and long-term forecasts remain positive, with some estimating the price could reach $150,000, and possibly even $500,000 in the future.
This optimism is based on the increasing interest of countries and major banks in cryptocurrencies, and the beginning of discussions about incorporating them into official reserves, which is a strong indicator of a structural shift in the status of these assets.
To Sell or Wait?
Ultimately, the decision is dependent on the investor's own strategy, but experts warn against selling in moments of sharp decline, as it entails risks of incurring confirmed losses.
They point out that an investor who bought Bitcoin just five years ago would have multiplied their investment many times over, while those who invested in it since 2016 have reaped profits exceeding 19000%.
