Over $500 billion drains from Bitcoin’s market cap in 2022 as BTC attempts to hold $20,000
The continued volatility of the crypto market continues to take a toll on Bitcoin (BTC) as the digital asset experiences widespread capital outflows. Notably, Bitcoin’s market cap has nearly tripled from the $1.2 trillion recorded during the asset’s peak in late 2021.
Specifically, Bitcoin’s market cap stood at $387 billion as of August 27, 2022, a year-to-date correction of over 56% from the $894 billion capitalization recorded in early 2022, according to data from CoinMarketCap.
Bitcoin is struggling for $20,000
The ongoing drop in market cap also continues to weigh on Bitcoin’s price as it faces a fresh battle to sustain gains above $20,000. The shedding of losses was recorded in the second quarter of 2022, when Bitcoin posted its worst quarterly returns at -56%. At press time, the flagship cryptocurrency is trading at $20,200, down over 5% in the last 24 hours.
Although the crypto market is betting on a future recovery, there is a possibility that the correction will extend further due to the prevailing macroeconomic conditions. The Federal Reserve is raising interest rates to combat high inflation and the market has since reacted negatively to the latest move.
For example, when Fed Chair Jerome Powell announced that the US Federal Reserve could raise interest rates further, the price of Bitcoin continued to fall. The Fed’s actions in particular have resulted in a strong dollar as investors flee from risky assets like Bitcoin.
At the same time, Bitcoin’s price action has largely mirrored that of stocks. In this case, both markets took a hit in 2022 and saw significant sell-offs.
In addition to the macro factors, Bitcoin and the broader crypto market have suffered from high-profile incidents such as the Terra (LUNA) ecosystem crash and Celsius filing for bankruptcy. Due to significant losses, the crash may have dampened investor motivation.
Consequently, the incident has contributed in part to an increase in regulatory debates around the world as more jurisdictions seek to protect consumers.
The selling pressure is easing
Additionally, Bitcoin’s market correction appears to be demotivating investors’ interest in trading the asset as they opt to HODL in anticipation of a future rally. This is highlighted by Finbold’s Aug. 25 report, which indicated that Bitcoin’s crypto exchange deposits fell below the seven-day moving average to a two-year low of 1,921 BTC.
Elsewhere, despite market conditions, analysts believe the correction is normal and part of the growth trajectory. In that regard, Mike McGlone, Senior Commodity Strategist at Bloomberg Intelligence, suggests that Bitcoin will stand out and outperform other asset classes in the second half of the year.
Disclaimer:The content of this website should not be construed as investment advice. Investing is speculative. When investing, your capital is at risk.
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