The price of Bitcoin (^BTCUSD) has climbed more than +5% today and moved back above $21,000. After plunging by more than -74% from its all-time in November of $68,906 to Saturday’s 1-1/2 year low of $17,614, Bitcoin today is seeing a bit of a recovery.
According to data from analytics firm CrytoQuant, fewer Bitcoins are being moved to exchanges from cold wallets (offline storage of digital assets) for a potential sale. As a result, the seven-day average of such flows fell to 92,470 Bitcoin tokens today from a peak of 137,326 on Saturday when the price of Bitcoin sank to a 1-1/2 year low.
Cryptocurrencies appear to be stabilizing following last week’s rout, as investor sentiment across most risk assets improves today. However, how long the short-term bottom in Bitcoin can hold is uncertain. With a global wave of monetary tightening draining liquidity from financial markets, Bitcoin prices and other assets remain vulnerable to further setbacks. Global stock prices are down -22% this year, and world bond markets have losses of nearly -15%.
Last week’s selloff in Bitcoin began on June 11 when a crypto shadow bank called Celsius Network suspended withdrawals from depositors. Then last Friday, digital-asset lender Babel Finance froze withdrawals. Research firm Nansen identified Celsius as one of the parties involved when the UST stablecoin lost its peg to the dollar in May, triggering the loss of tens of billions of dollars in the implosion of the Terra blockchain.
The recent plunge in Bitcoin has been startling. As of last Friday, the price of Bitcoin had declined for 12 consecutive days, its longest slump ever. Also, Ethereum (^ETHUSD) fell below $1,000 after having climbed to as high as $4,866 last November. What was once a more than $3 trillion industry is now valued at less than $1 trillion, shattering the myth that cryptocurrencies were immune to the economic fundamentals and higher interest rates that are currently punishing other asset markets.
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