Bitcoin price crashes by 8 per cent

Last week, the price of Bitcoin dipped by more than 8 per cent within several hours, putting it at a new, two-month low of US$25,314. This, in turn, triggered a general rout across the digital asset space, with more than US$1 billion in liquidations.

Analysts credited the rout to the macroeconomic factors, including the high interest rate policies adopted by the Federal Reserve. Additionally, investors remain cautious about investing in the sector, since the memory of 2022’s high profile crashes, like Terra-Luna and FTX, remain fresh.

The inward-facing nature of the cryptocurrency community also means that the industry is reliant on narratives to prop up prices, and it should come as no surprise that a report that Elon Musk’s SpaceX had sold Bitcoin also contributed to the scale of the crash.

Yet, digital assets have also made some progress over the past few months. The sector has seen significantly better growth, with Bitcoin growing around 60 per cent as compared to the S&P 500’s 13 per cent.

Ultimately, however, cryptocurrencies like Bitcoin are still seen primarily as vehicles for investment and hedges against inflation, so macroeconomic factors like recessions will continue to trigger selloffs of digital assets as investors liquidate positions to hold cash or move money into safer investments.

Until digital assets are seen as a safe asset class in general, this trend is likely to continue.