As of Thursday afternoon, Bitcoin shed almost 38% of its value in June alone, which makes it the worst month for the cryptocurrency since May of last year. The second-biggest crypto in the market in terms of market capitalization, Ether also shed about 47% of its value in the same time period.
Weakness in the crypto space
The digital assets sector is experiencing a great deal of weakness and some of it is because of a broader move away from risky assets. However, recent weeks have seen the confidence in the crypto space thoroughly rocked, as there are a number of companies that are dealing with a solvency crisis.
In May, the crypto market was rocked when the TerraUSD (UST) stablecoin project that was pegged to the US dollar, along with its sister token named LUNA, imploded without any warning. This resulted in a collective loss of a whopping $60 billion.
Early June saw renowned crypto lender Celsius Network, which offered high returns to people in return for their crypto deposits, freeze its withdrawals for clients, blaming the market conditions for its decision.
On Monday, well-known crypto hedge fund Three Arrows Capital defaulted on its loan from Voyagers Digital worth $670 million. Then sources revealed on Tuesday that the company had entered into liquidation. On Thursday, sources also said that the FTX exchange was planning on buying crypto lending platform BlockFi for a value that was 99% below the company’s last valuation.
All of this is happening during a time when companies are laying off their staff, which includes prominent exchange Coinbase. It has seen its stock plunge 40% in June alone, which makes it the fourth negative month in a row.
The fact is that extreme volatility is an inherent aspect of engaging in the crypto market. There have been two extended periods of falling prices that bitcoin has seen in the last decade before it managed to rebound. The last crypto winter occurred in 2018 and bitcoin had shed almost 80% of its value in this time before it made a recovery and touched a peak of $69,000 in November 2021.
However, things were looking pessimistic due to Bank of America’s note on Wednesday. According to analysts, the data shows that consumers in the United States have become wary of the crypto space. The internal data shows that the number of active crypto users has declined 50%. In November, this figure had reached 1 million, but in May it stood at 500,000.
In just a handful of months, the crypto market has lost more than $2 trillion of its value and this has put retail investors under stress, as they had bet their money on crypto projects that had been deemed safe. Still, there are a lot of bitcoin proponents out there that believe there will be another revival. They are purchasing the cryptocurrency at what they believe are record lows. MicroStrategy’s CEO tweeted on Wednesday that they had bought another 480 bitcoins.