Bitcoin, ethereum and other cryptocurrency prices have crashed as the crisis in Ukraine rattles global investors.
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The bitcoin price, dipping under $38,000 per bitcoin, is down 10% on this time last week and almost 30% from its early February high of almost $46,000. Ethereum, the second-largest cryptocurrency after bitcoin, has seen similar declines—with fierce competition weighing on the ethereum price.
Now, as assets that have soared over the last couple of years see heavy sell-offs in the face of looming Federal Reserve interest rate hikes, one billionaire value investor has warned some are going to get badly hurt in the coming “cataclysmic market shift.”
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“I think there’s going to be a few people who’ve really gone over their skis and will get hurt badly,” the unnamed billionaire told Insider, with bitcoin and crypto named along with blank-check SPACs and retail-led meme stocks as examples of overblown market exuberance.
The bitcoin and crypto market hit a combined value of around $3 trillion in November last year, up from under $300 billion two years ago.
“We really did hit peak stupid, but peak stupid extended beyond truly, truly stupid and then we went to bottom-of-the-ocean-rare-earth-metal-companies stupid.”
Big stock market winners during pandemic-era lockdowns—such as Coinbase, Peloton, Zoom and PayPal—have dropped sharply from their recent highs, with the likes of Facebook’s Meta and Elon Musk’s Tesla also falling hard as investors get to grips with a return to normality.
Fed chair Jerome Powell triggered the sell-off in November when he signaled an ending of the Fed’s easy monetary policy in order to tackle soaring inflation. Investors are now braced for an interest rate hike in March, with more expected to follow.
The bitcoin price—along with ethereum and other major cryptocurrencies—has traded more like a high-growth tech stock since mid-2020 and has crashed along with them in recent months. Traders are now more focused on potential downsides than upsides.
“$32,500 [per bitcoin] looks more like the ‘point of no return,'” John Kicklighter, chief strategist at DailyFX, said via email. “As we look ahead to a new trading week with a serious fundamental cloud overhead, there are many assets that face significant volatility and directional variability depending on what world leaders decide.”
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“U.S. markets are closed for President’s Day but few on Wall Street will be sorry when they look out at the sea of red being displayed by their European Counterparts,” Danni Hewson, AJ Bell financial analyst, wrote in an emailed note.
“The stage is set for another volatile week as investors consider which stocks might be impacted if Russia does ratchet up the tension by sending troops into regions held by Russian backed separatists.”
Last week, the bitcoin price “began to fall sharply in unison with stock indices,” Alex Kuptsikevich, senior financial analyst at FxPro, wrote in emailed comments. “The decrease in risky assets was caused by the growing tension around Ukraine, where the situation is becoming tenser.”
Kuptsikevich pointed to ethereum cofounder Vitalik Buterin’s comments that a lot of crypto developers would “welcome” another crypto winter period of prolonged low prices and a return of the closely-watched Bitcoin Fear and Greed Index returning to “extreme fear” territory.
“The people who are deep into crypto, and especially building things, a lot of them welcome a bear market,” Buterin said during an interview with Bloomberg on the sidelines of an ethereum conference in Denver, Colorado.