New York
CNN Business
—
It has been an absolutely brutal year for investors in bitcoin and other cryptocurrencies.
Bitcoin has lost more than half its value in 2022. Now hovering around $23,000, the price of a single bitcoin has plunged more than 65% below last year’s all-time high of nearly $70,000. The value of all cryptos has fallen from around $2.2 trillion at the end of 2021 to just over $1 trillion currently.
Bitcoin, the world’s largest crypto, makes up about 42% of the total market, but 2022 has been just as terrible for the owners of other crypto-related assets like Coinbase. The brokerage’s stock has fallen 75% so far this year. Shares of rival Robinhood have lost half their value.
There is hope that the worst for crypto may be over. Bitcoin is up more than 15% in the past week, and two other top cryptocurrencies are up even more.
Solana is up more than 35% in the past seven days, while ethereum, or ether for short, is up nearly 45%. Ether, the second most valuable crypto, is widely used to finance purchases of non-fungible tokens, or NFTs, the digital assets that have taken the collectibles world by storm.
Coinbase has also rallied, and was up 9% on Monday. Software company MicroStrategy (MSTR), which had almost 130,000 bitcoins on the balance as of June 30, has risen more than 35% in the past five days.
The crypto comeback could be validation for the sector’s biggest backers. At the same time, it should also serve as a reminder that the emerging market is likely to remain volatile for the foreseeable future.
“We will see a long-term recovery in the digital assets sector, but I wouldn’t get too excited just yet,” said Joel Kruger, market strategist at LMAX Group. “This is still an emerging market.”
Kruger said bitcoin’s rally has lagged the sharper upward moves in ether and other smaller cryptos, and remains a near-term concern. The broader group of cryptocurrencies and stocks may not see a more meaningful recovery until there is “a more healthy bounce” in bitcoin, he added.
So all the hype about bitcoin being the digital equivalent of gold is just that: hype. As an asset, bitcoin behaves much more like volatile tech stocks rather than the far more stable commodities like gold or government-backed currencies like the dollar and euro.
Investors should also consider that there may not be enough interest in crypto to justify the thousands of coins, tokens and exchanges out there. If that is the case, only the strongest cryptos will survive and thrive.
“Crypto has seen a dotcom era-like run,” when many great ideas and companies were created, Adam Grealish, chief investment officer at wealth management fintech Altruist, said in an email. But a number of not-so-good ideas and companies were also launched, he added.
The same scenario is likely to apply to crypto. “With tougher markets, companies in weaker positions and with weaker business models will feel a lot of pressure,” Grealish said.
Don’t tell the crypto bulls. The broader rally is lifting shares in nearly every company connected to the industry. Several cryptomining firms, which use computers to solve complex mathematical equations to generate new bitcoins, have moved sharply higher in recent days.
Marathon Digital (MARA) rose 21% on Monday and has gained more than 50% in the past week. Riot Blockchain (RIOT) is up more than 40% in the past five days, while Hive Blockchain (HVBTF) and Bitfarms are each up around 25%.
So have bitcoin, ether and top crypto stocks finally bottomed out? There are some hopeful signs.
Two banks that make crypto-backed loans and offer digital currency deposits, Silvergate Capital ( SI ) and Signature Bank ( SBNY ), each reported earnings and revenue on Tuesday that topped Wall Street forecasts.
It also appears that the sector’s turmoil has created a shake-up of winners and losers among both listed companies and startups.
Crypto lender Celsius was forced to file for bankruptcy earlier this month. But privately held crypto giant FTX continues to thrive, now valued at $32 billion.
FTX recently agreed to provide a line of credit to struggling crypto firm BlockFi, and the company’s billionaire CEO, Sam Bankman-Fried, has talked about using FTX’s financial strength to bail out other cryptic crypto companies as well.
Bankman-Fried also has a stake in Robinhood, and there was recent talk that FTX might want to buy the struggling brokerage. Bankman-Fried denied those reports to CNN Business.
