The cryptocurrency market is starting to recover after losing more than $300 billion over the course of just seven days.
This crash, the largest in the crypto market since May 2021, along with tech stocks’ recent downturn, is comparable to both the bursting of the dotcom bubble and the Global Financial Crisis (GFC) of 2008, according to a new report by Bank of America Research.
The crash in crypto and speculative tech “now rivals” both the dotcom bust and the subprime mortgage crisis, according to BofA’s Flow Show team, led by chief investment strategist Michael Hartnett, noting that the Nasdaq lost 73% peak to trough in the early 2000s, and bank stocks lost 78% during the Great Financial Crisis of 2008 and 2009. The report appears to add together crypto’s market cap losing 45% and Nasdaq’s 29% dip year to date.
This week, Bitcoin fell below $30,000 before dropping to just under $27,000 on Thursday, while the TerraUSD (UST) stablecoin crashed far below its $1 peg and applied more downward pressure on the overall market.
Alongside the cryptocurrency market, tech stocks have also taken a hit. Increasingly moving in tandem, the correlation between Bitcoin, the S&P 500, and the Nasdaq has hit all-time highs in recent months. The 30-day average of the Bitcoin-Nasdaq score has approached an exact one-to-one correlation since Jan. 1, and reached 0.82 this week, the New York Times reported on Wednesday.
This connection became especially apparent after the Federal Reserve indicated it would raise interest rates by half a percentage point last week. Afterward, cryptocurrency and stocks began to plummet.
On Friday, the largest cryptocurrency by market value has recovered to $30,000, up 7% in the past 24 hours. The overall market has also seemingly calmed, up 11% in the same time frame. But UST remains underwater at 10 cents, and its sister token Luna hit zero (currently $0.00001923, to be exact).
Traditional markets are seemingly stabilizing too. The Dow Jones industrial average rose 490 points, or 1.55%, on Friday. The S&P 500 increased 2.2%, and the Nasdaq composite increased 3.3%.
But folks are scarred from the crash. The cryptocurrency Fear and Greed Index shows sentiment is still “extreme fear.”
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