A new “crypto winter” could be around the corner after a huge crypto price crash has wiped $1.5 trillion from the combined cryptocurrency market—hitting bitcoin, ethereum, BNB, solana, cardano and XRP hard.
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The bitcoin price has this week fallen to levels not seen since July last year, losing 20% over the last week and dropping to half its all-time high of almost $70,000. Other top ten cryptocurrencies ethereum, BNB, solana, cardano and XRP have all lost between 20% and 30% from their price this past week (with Wall Street giant JPMorgan issuing a stark ethereum price warning).
As the huge crypto crash rolls on, analysts are warning the price of bitcoin and other major cryptocurrencies could fall even further, potentially heralding a bleak, new crypto winter—a prolonged bear market that saw most cryptocurrencies lose 90% of their value in 2018.
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“The mass marketing of bitcoin reminds us of the activity of stockbrokers in the run-up to the 1929 crash,” Paul Jackson, Invesco’s global head of asset allocation wrote in a note this week, it was reported by Business Insider. “We think it is not too much of a stretch to imagine bitcoin falling below $30,000 this year.”
Over the last year, bitcoin and ethereum rivals such as BNB, solana, cardano and even the meme-based dogecoin have made huge gains, climbing thousands of percent as investors bet the cryptocurrencies could see far wider adoption and form the basis of a new, decentralized internet. The combined crypto market peaked at around $3 trillion in November, up from under $500 billion a year earlier.
Jackson warned the huge bitcoin and crypto price rises over the last year could be seen as a “financial mania” and lead to steep losses as the market returns to normality. “A loss of 45% is experienced in the 12 months after the peak of a typical financial mania,” Jackson wrote.
Meanwhile, analysts at investment bank UBS have warned the looming prospect of Federal Reserve interest rate hikes and the end of pandemic-era stimulus measures could plunge cryptocurrencies into a crypto winter bear market as happened in 2018.
UBS also expects regulatory crackdowns on bitcoin and other “high-flying” cryptocurrencies such as ethereum, BNB, solana, and cardano. This week, Russia’s central bank said it wanted the country to follow China in issuing a blanket ban on cryptocurrency trading and mining—using high-powered computers to secure blockchain networks in exchange for new coins.
Russia’s central bank said the rapid growth of bitcoin and other cryptocurrencies has been caused by speculative demand and that cryptocurrencies carry characteristics of a pyramid scheme, warning of potential price bubbles in the market.
Wild speculation on cryptocurrencies “inevitably invites closer oversight to guard consumers [and] protect financial stability,” the UBS analysts, led by James Malcolm, wrote in a note to clients. “High-flying stablecoins and [decentralized finance] projects seem almost sure to face bigger setbacks from authorities in the coming months.”
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However, some bitcoin and crypto market watchers aren’t too worried about Russia’s potential crypto ban, pointing to Russia-based miners’ far smaller contribution to bitcoin’s network, known as the hashrate.
“Russia imposing a blanket ban on bitcoin mining may well have an impact on its hashrate and price in the short term,” Simon Peters, analyst at trading platform eToro, said via email.
“However, I don’t believe this will be a long-term headwind. Russia is only responsible for approximately 11% of the global hashrate. This is in stark comparison to China, which when it banned bitcoin mining in May 2021, the mining operations based there accounted for 60–70% of the global hashrate of the bitcoin network. When these China-based miners went offline due to the ban, the hashrate dropped significantly along with the price. But, as those miners set up in other countries and jurisdictions the hashrate rebounded and is now at an all-time high.”