Bitcoin just had its worst month on record

Bitcoin just ended its worst month on record, losing more than 38% of its value in June, Thursday afternoon. Ether, the world’s second-largest cryptocurrency by market capitalization, ended the same period down around 47%.

Although the weakness in the digital asset sector is part of a broader flight from risk, confidence in the crypto market, in particular, has been shaken in recent weeks as major companies face solvency crises. .

In May, the popular U.S. dollar-pegged stablecoin project UST — and its sister token luna — imploded, recording a collective loss of $60 billion. Then, in early June, lending company Celsius, which promised users high returns for their digital currency deposits, suspended withdrawals for customers, citing “extreme market conditions”.

Elsewhere, prominent crypto hedge fund Three Arrows Capital defaulted on a loan worth over $670 million on Monday. And on Thursday, sources told CNBC that FTX plans to buy crypto lender BlockFi for $25 million. That’s 99% below BlockFi’s last private valuation, effectively “wiping out” investors in the company’s stock, a source says.

This all comes amid industry-wide layoffs at major crypto firms, including Coinbase, whose stock fell around 40% in June, marking its fourth consecutive negative month.

“There is still one aspect of crypto that we are waiting to see if another shoe will fall, if another entity will fail, if the credit cascade will continue,” said Matt Hougan, chief investment officer at Bitwise Asset Management, in an interview. “I think we need to get through the July 4 weekend and get through this quiet period in the market before building in the second half.”

To some extent, extreme volatility is the price to pay for doing business in the digital asset market. Over the past decade, bitcoin has seen two prolonged periods of falling prices before bouncing back. During the previous crypto winter in 2018, bitcoin lost over 80% of its value before bouncing back, eventually hitting its November 2021 peak of around $69,000.

But a note from Bank of America on Wednesday set a pessimistic tone. Analysts pointed to data indicating that US consumers are more wary of the crypto market. Internal customer data shows a more than 50% decline in the number of active crypto users from its peak of more than 1 million users in November 2021 to less than 500,000 in May, the bank said. .

The June drop was the worst for the cryptocurrency since it was first made available on exchanges in 2010. More than $2 trillion in value was wiped from crypto markets in a matter of months, punishing traders for retail who bet big on crypto projects that have been billed as safe investments.

The sub-$1 trillion market capitalization of the crypto market is tiny compared to the country’s GDP of $21 trillion or the real estate market of $43 trillion. But US households own a third of the global crypto market, according to Goldman Sachs estimates. A Pew Research Center survey also found that 16% of American adults said they had invested in, traded in, or used cryptocurrency.

Still, many bitcoin enthusiasts are expecting another revival and buying at what they anticipate will be all-time highs. Michael Saylor tweeted Wednesday that MicroStrategy scooped up an additional 480 bitcoins for around $10 million, bringing the company’s total holdings of the world’s most popular digital coin to around $4 billion.

“If your time frame is a week, a month, or even a quarter, I think there’s still significant volatility,” Hougan said. “If you have a time horizon measured in years, then yes, this is a great opportunity to think about entering the market.”

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