Fresh Volatility Could Signal Rocky Year for Bitcoin

Bitcoin is off to a rocky 2022, with prices tumbling below $40,000 for the first time since September, tracking to hit its worst start to a new year since 2012 and perhaps since its inception, Bloomberg reported.

The world’s first cryptocurrency lost about 14% in value since the start of 2022 and dropped 6% in New York trading to $39,774 on Monday morning (Jan. 10). At about 6 a.m. ET on Tuesday (Jan. 11) the price was $41,755.

“It has had a pretty shocking start to 2022,” Fiona Cincotta, senior financial markets analyst at City Index, told Bloomberg. “There’s a lot going on. We know that Bitcoin is volatile, but even for Bitcoin, we’re seeing some really big moves.”

See also: BitPay CEO: Bitcoin Payments Will Boom in 2022 as Crypto Reaches an Inflection Point

Developed in 2008 by an anonymous person or group that went by name Satoshi Nakamoto, Bitcoin started trading a year later, but pricing information from the early years is limited, Bloomberg reported.

Adoption of bitcoin and other cryptocurrencies escalated during the pandemic as life went all-in on digital and stimulus funds put more money in people’s bank accounts that was used for riskier investments as travel and entertainment shuttered worldwide.

“Cryptocurrencies are likely to remain under pressure as the Fed reduces its liquidity injections. Bitcoin could end 2022 below $20,000,” Jay Hatfield, CEO of Infrastructure Capital Advisors, told Bloomberg.

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“Tighter Fed policy affects not only interest rates but the equity risk premium as the Fed withdraws funds from the capital markets. Riskier investments such as unprofitable tech, meme stocks and cryptocurrency are disproportionately affected relative to the rest of the market since those investments are approximately twice as volatile as the overall market so have double the risk premium as the average stock,” said Hatfield.

Noelle Acheson, head of market insights at Genesis Global Trading, told Bloomberg that Bitcoin’s value loss seems to have been advanced by short-term traders. Long-term holders are “buying the dip,” she said.