Bitcoin price sinks as investors tense up

 


The price of Bitcoin tumbled to a three-month low of US$41,000 yesterday, causing the total market cap of cryptocurrency to dip below $2 trillion as investors stress over a decline in liquidity triggered by the Federal Reserve's projected early interest rate hike and annual balance sheet cut.


The global cryptocurrency market cap plunged to $1.96 trillion after the price of Bitcoin tumbled at around 2pm yesterday, down 4.27% from the previous day.


According to Bitkub Exchange, the domestic Bitcoin price was 1.42 million baht as of 2.08pm, dropping 3% from the previous day, while Ethereum stood at 109,000 baht per coin, declining by 6.81% from the previous day.


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"Cryptocurrency is a highly volatile asset," said Jirayut Srupsrisopa, group chief executive of Bitkub Capital Group Holdings.


"The price fluctuating 20-30% per day is normal, so investors should avoid using loans or savings to invest in cryptocurrency."


Mr Jirayut said the drop in price can be attributed to multiple factors, such as the Fed's projected interest rate hike and fiscal balance sheet cut that could affect the market's liquidity, as well as mass protests in Kazakhstan.


Aekkarat Srisupavichakit, head of risk management and a research specialist at Zipmex Thailand, said the Fed's tightening of its monetary policy will trigger a drop in liquidity in the cryptocurrency market as holders of major coins such as Bitcoin and Ethereum have begun trading away their assets to the dollar markets to secure returns and seek refuge from volatility.


However, the plunge doesn't necessarily suggest the cryptocurrency market will continue with a downtrend, he said. Even with the total cryptocurrency market cap below $2 trillion, it remains to be seen if this will trigger a bear market, said Mr Aekkarat.


If the Bitcoin price falls below $40,000, the next support level is $30,000, he said.


The Fed's recent policies also caused many US tech stocks such as Amazon and Apple to plunge, falling by 12% and 10% respectively yesterday.


Some people suggested the drop in the Bitcoin price can also be attributed to its upcoming halving period, which is when the reward for Bitcoin mining is cut in half. This period normally causes the price to decline for around 1.5 years, said Mr Aekkarat. The current halving period is slated to conclude by the end of this year.


Aside from external factors, sentiment in domestic cryptocurrency also soured after the Revenue Department announced a policy to collect capital gains tax from stock and cryptocurrency trading.


"New investors should be more careful when investing in cryptocurrency and other high-risk assets this year," Mr Aekkarat said.

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