Cryptocurrency crash wipes out more than US$1 trillion in market value

Bitcoin lost more than 12 per cent on Friday and dropped below US$36,000 to its lowest level since July, losing 45 per cent of its value since a November peak

Other digital currencies have suffered just as much, if not more, with Ether and meme coins mired in similar drawdowns

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A mural during the North American Bitcoin Conference at the James L Knight Center on January 19, 2022 in Miami, Florida. Photo: Getty Images/AFP

Published: 1:00pm, 22 Jan 2022

For bitcoin, there’s only been one constant recently: decline after decline after decline. And the superlatives have piled up really quickly.

With the Federal Reserve intending to withdraw stimulus from the market, riskier assets the world over have suffered. Bitcoin, the largest digital asset, lost more than 12 per cent on Friday and dropped below US$36,000 to its lowest level since July. Since its peak in November, it has lost over 45 per cent of its value. Other digital currencies have suffered just as much, if not more, with Ether and meme coins mired in similar drawdowns.

Bitcoin’s decline since that November high has wiped out more than US$600 billion in market value, and over US$1 trillion has been lost from the aggregate cryptocurrency market. While there have been much larger percentage drawdowns for both bitcoin and the aggregate market, this marks the second-largest ever decline in dollar terms for both, according to Bespoke Investment Group.

“It gives an idea of the scale of value destruction that percentage declines can mask,” wrote Bespoke analysts in a note. “Cryptocurrency is, of course, vulnerable to these sorts of sell-offs given its naturally higher volatility historically, but given how large market caps have gotten, the volatility is worth thinking about both in raw dollar terms as well as in percentage terms.”

With the Fed’s intentions rocking both cryptocurrencies and stocks, a dominant theme has emerged in the digital-asset space: cryptocurrencies have twisted and turned in nearly exactly the same way as equities have.