Bitcoin price has slumped to $43,030 from the high of over $47,700 on the 1st of January 2021. The prices of other popular crypto tokens like Ethereum, Solana, Cardano, Binance Coin etc also appear to be in a free fall since the start of the New Year, according to CoinMarketCap data.
The falling cryptocurrency prices have dampened the celebration mood of retail crypto investors. But the downward price movement in crypto markets is nothing new, hence not surprising for hardcore crypto enthusiasts.
According to Darshan Bathija, CEO & CO-founder Vauld, Bitcoin has largely been range-bound since the beginning of December 2021. However, the current price drop could be attributed to the uncertainties all markets are facing.
“The current price drop of BTC can be attributed to the uncertainty all markets are facing, with the spread of the Omicron variant,” said Bathija.
“We can expect two very contrasting things simultaneously – many investors will view this as an opportunity to buy the dip, while many will also try to cut their losses, leading to a sellers’ frenzy,” he added.
While retail investors have been largely indecisive on the asset, institutional investors have been increasing their stake in crypto.
For example, Microstrategy took advantage of the dip and purchased 1900 BTC worth around $91 million on Dec 30, 2021.
“On-chain data also revealed that whales carried on with their buying spree while Bitcoin dropped toward the end of 2021. There was a significant increase in the number of addresses holding between 1,000 and 10,000 BTC between December beginning and December end. What this means is that majority of the investors were putting a lot of faith in Bitcoin’s ability to recover possibly in the first quarter of 2022,” said Bathija.
Alexander Cavendish, CEO of hedge fund Hedonova attributed the current fall in crypto prices to the rotation of money from retail to institutional investors.
“There’s a concept called ‘rotation’ in investments. For every asset class, money changes hands between retail and institutional investors and this tend to happen in cycles or after a significant bull or bear run,” Cavendish told FE Online.
“What we’re looking at now is the rotation of money from retail investors to institutional investors. This is the reason why crypto prices are falling,” he added.
Cavendish expects that bitcoin prices are going to be rangebound for some time now before a strong move to $120,000. “The move from $4K to $60k was on the back of retaining adoption, this move is going to be on the back of institutional adoption,” he said.
In 2021, almost every top crypto token returned massive profits to retail investors. While the same may not be expected to be repeated in 2022, but industry experts do hope for some stability going ahead in crypto markets this year.
(Cryptocurrencies are unregulated assets in India. Investing in them could put your money at risk. Please consult your financial advisor before making any investment decision)