The crash of bitcoin and ethereum already erases almost a trillion dollars from the cryptocurrency market

For bitcoin and ethereum, the two cryptocurrencies with the largest market capitalization, there has only been one trend in recent days: falling and falling. A correction that has accumulated and spread to the rest of the cryptocurrencies even more, erasing hundreds of billions of dollars of market capitalization.

The central bank has begun to turn off the stimulus tap or plans to do so soon in most major economies. This, together with geopolitical tensions, is severely punishing the riskiest assets around the world, which have been enduring strong turbulence in recent weeks.

Bitcoin, the largest digital asset, has fallen below $34,000 to hit its lowest level since July. Since hitting all-time highs in November, bitcoin has already lost more than 50% of its value. Other digital currencies have suffered as much, if not more, as is the case of ether or solana, which continue to experience notable declines this Monday, even reaching double digits. How far can bitcoin fall?

Bitcoin y ethereum

The decline of bitcoin from its November highs has subtracted 600,000 million from the capitalization of that market, a loss that rises to 800,000 million if added to ethereum and that exceeds a trillion dollars when the fall of the rest of the cryptocurrencies is accounted for.

“It gives an idea of ​​the scale of value destruction that percentage declines can mask,” Bespoke analysts say in a note echoed by Bloomberg. “Cryptos are, of course, vulnerable to these types of sell-offs given their intrinsic volatility which is much higher, but given the large market cap in size, it is worth looking into the volatility both in gross dollar terms and in dollar terms. percentage”, say these experts.

Cryptocurrencies are risky assets

All this has revealed what has been pointed out for a long time: cryptocurrencies are pure risk, that is, they have nothing to do with gold or other safe haven assets, quite the contrary, bitcoin, ethereum and the rest of cryptos behave like stocks or even oil. When interest rates rise and a lower growth and riskier scenario begins to be discounted, cryptocurrencies fall even more strongly than traditional risk assets.

“Bitcoin is being hit by a wave of risk-off sentiment. For more clues, keep an eye on traditional markets,” he says. “The fear and unease among investors is palpable.”

Katie Stockton, founder and managing partner of Fairlead Strategies, a research firm focused on technical analysis, explains that these moves tend to “remind us to classify bitcoin and altcoins as risky assets rather than safe havens,” she says.