Bitcoin sees bear-market skid — living up to its reputation for seismic price swings


Bitcoin prices entered bear-market territory over the weekend, typically defined as a decline from a recent peak of at least 20%.

Stop us if you’ve heard this story before.

The notoriously volatile asset, which has a record of massive downside slumps following a stratospheric run-up, touched a low of nearly 28% beneath its record high of $41,962.36 on Monday, based on CoinDesk. Bitcoin
BTCUSD,
-15.34%

technically entered a bear market on Sunday and extended its slide early Monday before stabilizing somewhat.

For new investors in the world’s most popular cryptocurrency, a decline of that magnitude would likely represent a brutal hit to their digital-asset portfolio.

However, for the so-called hodl-ers, or those investors who form the base of the bitcoin investment community that maintain their stakes in the asset through thick and thin, this recent slump for the distributed-ledger backed asset is par for the course.

To say that bitcoin is one of the more turbulent assets, given its propensity to wax and wane in price, is even a bit of an understatement when the digital currency is compared against traditional assets.


Dow Jones Market Data

Over the course of the past 11 years, bitcoin prices have seen 722 instances where prices saw a change of 5% or greater, 227 instances in which it swung by at least 10% and 47 times that it has moved by at least 20%, according to Dow Jones Market Data.

Gold prices
GC00,
+0.69%

and the S&P 500 index
SPX,
-0.54%

don’t even come close to generating those types of swings in value, the data and attached table show.

The S&P 500 has seen 151 instances of moves of at least 5%, 10 times that it has seen shifts of greater than 10% and only 1, Black Monday in October of 1987, where it moved by at least 20%, based on data going back to 1928.

Gold, meanwhile, has only seen 27 prices swings of at least 5% since 1984.

That fact may be one reason that U.K.’s financial regulator on Monday issued a very blunt warning that investors ought to be prepared to lose all of their money when they purchase speculative digital assets.

“If consumers invest in these types of product, they should be prepared to lose all their money,” wrote the U.K.’s Financial Conduct Authority.

The FCA’s commentary is unlikely to persuade those who believe bitcoin is the future of finance but the moves of late for the crypto highlight the fear that the surge in its price bears many of the hallmarks of an asset bubble.

Bitcoin’s move also came as U.S. equities slumped, with the Dow Jones Industrial Average
DJIA,
-0.28%
,
the S&P 500 index
SPX,
-0.54%

and the Nasdaq Composite Index
COMP,
-0.93%
,
all trading under pressure after putting in record highs on Friday.

Complaints about trouble accessing a popular digital-asset trading platform, Coinbase, on Monday also was being credited for some of the weakness in bitcoins.



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