Bitcoin price: Value of Bitcoin down 75% from peak
Let’s hope you didn’t jump on the bitcoin bandwagon a year ago. If you bought $1,000 worth of bitcoin when prices peaked in November 2021, your investment would be valued at only about $250 today.
On Friday, one bitcoin cost about $16,700. The price has fallen by more than 75% since hitting an all-time high of $68,790 on November 10, 2021, according to CoinMarketCap.
Ether, the original token of the Ethereum blockchain network and the second largest cryptocurrency, has declined by roughly the same percentage since its all-time high, also in November 2021.
Bitcoin has gone through crashes like this before. In December 2017, the crypto hit a then-record high just above $20,000, and the price dropped all the way to $3,191 the following December, a decline of 84%.
The cryptocurrency has reported two declines of more than 50% in the past three years – first when the pandemic threw the global economy into turmoil in March 2020, and then again during a decline after bitcoin hit a then-record price above $64,000 in April 2021.
The Bitcoin crash of 2022 is just the latest reminder of the risks associated with investing in cryptocurrency, given its extreme volatility.
Of course, only the unluckiest investors who bought at the peak are actually down 75% on their investments. And pretty much wherever you’ve invested, including the S&P 500, your portfolio is likely down this year. It is also important to note that for long-term investors this is only a loss on paper. You only realize losses when you sell.
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Why is bitcoin down this year?
Crypto and stocks have often followed the same price trends in 2022. Both asset classes have been affected by high inflation, leading to higher interest rates and recessionary concerns, said Alkesh Shah, a global crypto and digital asset strategist at Bank of America.
But the decline in crypto has been steeper this year than other investment categories considered risk assets, such as technology stocks, which are down about 30% this year, Shah says. However, it is a different story if you look further back in time.
“On a two-year basis, the cryptocurrency sector is up over 300% compared to, say, software technology stocks which are up 35% over the past two years,” he says. “So it’s a group that is significantly outperforming on a two-year basis, but it definitely corrected this year along with the other risk assets.”
Bitcoin specifically is actually down about 5% in the last 24 months. But if you invested in bitcoin four years ago, you would have tripled your money.
Crypto exchange worries – and shifts to crypto wallets
With cryptocurrencies down more than stocks this year – but up more than stocks over longer time frames – crypto fanatics and doubters alike have food for argument.
“It depends on how you want to look at it, and it seems like the situation is giving everyone something to talk about, but given the events that have happened with FTX’s bankruptcy, the crypto skeptics are certainly loud at this point,” says Shah.
Even before the recent collapse of major crypto exchange FTX, Shah says crypto prices were affected this year by the bankruptcy of crypto hedge fund Three Arrows (3AC) and lending platform Voyager Digital, as well as challenges for another crypto lender, BlockFi, which is now preparing for a potential bankruptcy filing, according to The Wall Street Journal.
“3AC, Voyager and BlockFi all ran into problems and then had to relax their positions, which then caused more pressure on bitcoin,” says Shah.
The price of bitcoin hasn’t crashed further amid the FTX fiasco, but there has been a trend of investors pulling their money out of crypto exchanges and moving it into crypto wallets, according to Shah. Some people are worried about having their money in exchange, fearing that others may go under.
“Right now, the trend after FTX is not that bitcoin is going down,” Shah says. “There are people moving bitcoin away from exchanges and putting it in wallets.”
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