For the past several months, the hallmark volatility that previously attracted hordes of investors to the world’s largest cryptocurrency has been absent, with the rate of its swings reaching its lowest point since 2016.
Thursday’s activity marked another entry in an emerging trendline for Bitcoin in 2023, with the token having already crashed to two similar low points in January and March. But every sharp decline this year has been followed by recovery, said FRNT Financial’s Stephane Oullette. The sector is also overly reliant on narrative to prop up prices, with hype around crypto’s next buzzy project or a Wall Street firm buying cryptocurrencies among the things that spur on investors. A Wall Street Journal report that Elon Musk’s SpaceX had sold Bitcoin holdings worsened Thursday’s decline.
Recent price declines can be partly attributed to US enforcement actions against crypto exchanges, CoinShares’s James Butterfill said in a blog post on Friday, adding that a recent survey saw fund managers rank regulatory decisions as their key concern. The lingering threat of further lawsuits or penalties haunts the market, leaving investors wary of the safety of some of crypto’s top venues.