Bitcoin just had its worst month ever

Bitcoin has just ended its worst month ever, losing more than 38% of its value in June, starting Thursday afternoon. Ether, the world’s second largest cryptocurrency in terms of market value, ended the same period down by about 47%.

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

In May, the popular stablecoin project UST – and its sister token luna – imploded with a total loss of $ 60 billion. So in early June, the lending company Celsius, which promised users high returns on their digital currency deposits, put withdrawals for customers on hiatus, citing “extreme market conditions”.

Elsewhere, the prominent crypto-hedge fund Three Arrows Capital defaulted on a loan worth more than $ 670 million on Monday. And on Thursday, sources told CNBC that FTX plans to buy cryptocurrency lender BlockFi for $ 25 million. It is 99% below BlockFi’s latest private valuation, and “obliterates” the company’s equity investors, according to a source.

All this is happening in the midst of industry redundancies at large crypto companies, including Coinbase, whose shares fell around 40% in June, marking the fourth negative month in a row.

“There’s still one aspect of crypto that we’re waiting to see if another shoe will drop, if another device will fail, if the credit cascade will continue,” Matt Hougan, chief investment officer at Bitwise Asset Management, said in an interview. “I think we have to get through the fourth weekend of July and get through the quiet period in the market before we build in the second half of the year.”

To some extent, extreme volatility is the price of doing business in the digital asset market. Over the past decade, bitcoin has experienced two long periods of depressed prices before picking up again. In the previous crypto winter of 2018, bitcoin lost more than 80% of its value before declining, eventually rising to its peak in November 2021 at around $ 69,000.

But a note from Bank of America on Wednesday struck 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% decrease in the number of active crypto users from the top of over 1 million users in November 2021 to less than 500,000 in May, the bank said.

The fall in June was the worst for the cryptocurrency since it was first made available on stock exchanges in 2010. More than $ 2 trillion in value has been erased from the crypto markets in a few months, punishing retailers who invest heavily in crypto projects that were billed as secure investments.

The crypto market’s market value of less than 1 trillion dollars is small compared to the country’s GDP of 21 trillion dollars or 43 trillion dollars housing market. But US households own a third of the global crypto market, according to estimates by Goldman Sachs. A survey by the Pew Research Center also found that 16% of American adults said they had invested in, traded or used a cryptocurrency.

Still, many bitcoin enthusiasts expect a new revival, and buying at what they expect will be record low. Michael Saylor tweeted Wednesday that MicroStrategy snatched up another 480 bitcoin for around $ 10 million, bringing the company’s total holdings of the world’s most popular digital currency to around $ 4 billion.

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

SEE: Bitcoin fell 30% in one week. Here’s what happened