Market update

The year started with a US$2.21 trillion (AU$3.1T) crypto market cap but it’s declined 25% since and hit US$1.69 trillion (AU$2.35T) as of today. The threat of regulatory clampdowns and the possibility of war with Ukraine is weighing heavily on markets. Bitcoin fell below the US$37K (AU$51.5K) mark earlier today and the Fear and Greed Index is at 25 or Extreme Fear. At the time of writing, Bitcoin is at AU$51.7K for a 16% loss this week. Ethereum lost 15% to trade just below AU$3,600, XRP fell 15% and Polkadot lost 16%. Activity on the Bitcoin network has fallen back to mid-2019 levels, from 400K daily entities transacting in November down to around 275K today “indicative of tepid demand from new users,” Glassnode commented. In more positive news, El Salvador’s GDP soared by 10.3% in 2021 for the first time, showing that at the very least the Bitcoin Law didn’t tank its economy.

After an all too brief spell of fine weather last week, normal service has resumed, with Bitcoin falling 5.6% this week to trade around AU$59,700 (US$42.6K). Ethereum fell 9.2% to AU$4,100 (US$2.9K), while XRP was down 5.3%, Cardano (-14%), and Polkadot (-17.6%). The falls in crypto markets mirror falls in traditional markets which most blame on mounting fears of an imminent Russian attack on Ukraine. After hitting a local high of 54, the Crypto Fear and Greed Index has again fallen to 46 (Fear). In more promising news the Bitcoin hashrate has hit a new seven day average all time high of 201.3 terahashes per second (TH/s). It’s up 20% since the start of the year and peaked at 248 TH/s in the past 24 hours.

And just like that, ‘Crypto Winter 2022’ appears to have been just a couple of weeks of unseasonably cold weather. Of course, everything could still flip tomorrow, but the weather is fine and sunny this week with Bitcoin up 14.5% to trade around AU$62,000 ($US44K) and Ethereum up 13% to trade above AU$4400 (US$3.1K). Everything else was up by double figures, including Cardano (10%), XRP (29%), and Polkadot (11%). Influencer Lark Davis summed up the price action, tweeting yesterday: “Bitcoin has been in a downtrend since November, we have now broken out of that trend. Next stop? MOON.” The Fear and Greed Index has risen to 45 (Fear) – up from 26 last week – and the total market cap of all cryptocurrencies is up nearly half a trillion this week to AU$2.814T (US$2T).

Let’s face it: January was not a great month for the crypto markets, with the market cap for all cryptocurrencies plunging from almost AU$3.2 trillion down to AU$2.47T today.  It’s the worst start to a year since Crypto Winter began in 2018. There were only 11 green days this month and cryptocurrencies across the board lost double digits as prospective rate rises in the US spooked markets (here in Australia the RBA is expected to end the AU$4 billion a week bond buying program and open the door to interest rate rises after inflation reached the central bank’s target for the first time since 2014). Bitcoin is down 19.5% on a month ago, and Ethereum is down 29%. The good news is that February has started with a bounce and BTC is up 2% in the past week to AU$54,385 (US$38,475) and ETH is up 7% to almost $3,800. Cardano lost 4%, Ripple was flat and Polkadot increased 4%. The Crypto Fear and Greed Index is at 20, which is still ‘Extreme Fear’ but heading in the right direction after bottoming out last week around 11. 

The party is over, the fluro lights are back on and what seemed a magical playground now looks more like a church hall strewn with empty beer cans. That’s the general feeling this week after crypto markets nuked, wiping half a trillion off the combined market cap. Bitcoin plunged to AU$46,560 overnight (US$32,970) – a 51.6% decline from the all time high in November – but bargain hunters have pushed that back up to AU$51,200, capping the loss at 16% this week. Various analysts have suggested that level may be the bottom, but nobody really knows for sure. The current correction is in the league of the 51% correction from April to May last year and the 60.8% correction from June 2019 to March 2020. We remain at levels last seen in July 2021. The Grayscale Bitcoin Trust Premium plummeted to an all time low of 30%, but El Salvador bought the dip, adding 410 BTC to its stack. Ethereum lost 26%, Cardano lost 35%, XRP (-22%) and Polkadot (-32%). The Crypto Fear and Greed Index is at 13, or Extreme Fear, after dipping to 11 yesterday.

Although Bitcoin managed to break above AU$60K (US$43K) a few times, at the time of writing it had pulled back to around AU$58,700 (US$42.3K) for a -2% finish to the week. Ethereum gained 1.5% this week and is up around AU$4,400 (US$3.2K) while Cardano surged on positive network metrics and announcements and is up significantly by 38%. XRP was flat, Polkadot (4.5%) and Dogecoin (17%) both saw more significant gains. The Crypto Fear and Greed Index is at 22, or Extreme Fear which is pretty much where it’s been stuck so far in 2022.