Bitcoin and cryptocurrency prices have bounced back after crashing as the Russian invasion of Ukraine sent shockwaves through global markets.
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The bitcoin price fell under $35,000 per bitcoin this week before rebounding to almost $40,000. Other top ten cryptocurrencies ethereum, BNB, solana, cardano and XRP have also swung wildly. Despite managing to turn it around this week, the combined bitcoin and crypto market remains down by almost 50% from its November peak as a surprising range of issues bite.
Now, the chief executive of one of the world’s largest cryptocurrency trading platforms has warned the recent downturn could be the beginning of a chilling new crypto winter—a bear market that could see the price of bitcoin and ethereum fall 90% from their all-time highs.
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“If this circle continues, we are now at the early stage of a bear market,” Du Jun, the co-chief executive of Seychelles-based cryptocurrency exchange Huobi, told CNBC in comments translated from Mandarin.
Du pointed to bitcoin’s supply cutting halving schedule when the current flow of new bitcoin coming on to the market each day is expected to fall by half, as it did in 2020 and 2016. After each of these supply cuts, the bitcoin price peaked the following year.
“Following this cycle, it won’t be until the end of 2024 to the beginning of 2025 that we can welcome the next bull market on bitcoin,” said Du.
“It’s just supply and demand when it comes down to it,” Cory Klippsten, the chief executive of bitcoin-buying app Swan Bitcoin, said via Telegram. “Investors really only need to focus on the demand side of the equation because of bitcoin’s inelastic supply.”
When bitcoin last fell into a prolonged bear market through 2018 and 2019 the bitcoin price was at one point down almost 90% from its 2017 high, suggesting the bitcoin price could fall back under $10,000 per bitcoin.
The price of bitcoin, ethereum, BNB, solana, cardano and XRP are all down around 50% from highs seen last year with the downturn originally triggered by the U.S. Federal Reserve signaling it will soon hike interest rates and begin scaling back its pandemic-era stimulus measures.
“It is really hard to predict exactly because there are so many other factors which can affect the market as well—such as geopolitical issues including war, or recently Covid, also affect the market,” Du added.
The Russian invasion of Ukraine this week caused bitcoin and cryptocurrencies to follow stock markets lower as investors fled to traditional safe havens such as gold. The panic seems to have been short-lived, however.
“It appears that the invasion was a ‘sell the rumor, buy the news’ event, where risk-on assets were bought aggressively as it was confirmed that Russia was indeed invading,” Marcus Sotiriou, an analyst at U.K.-based digital asset broker GlobalBlock, wrote in an emailed note. “The market dislikes uncertainty so as soon as we had some clarity of the long-lasting crisis, buyers stepped in.”
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Despite extreme price swings for bitcoin and other cryptocurrencies, many bitcoin believers remain upbeat about bitcoin’s outlook—though the so-called bitcoin maxis are less bullish about ethereum, its biggest rivals BNB, solana, cardano and smaller coins like XRP.
“What we are seeing in the broader ‘crypto’ market is not surprising to people in the bitcoin industry,” added Swan Bitcoin’s Klippsten. “There were high levels of speculation and a lot of risk-taking behavior in [the crypto market] which I believe was a result of the ultra low-rate environment we find ourselves in today.”
Klippsten warned that smaller cryptocurrencies could lose 99% of their value, as they have done in the past, but points to bitcoin’s past performance as evidence it will be able to recover.
“Bitcoin has time and time again recovered from these crypto winters with a greater percentage of its investor base consisting of convicted, long-term investors.”