Bitcoin extends slide as cryptocurrency selloff deepens
Bitcoin continued to fall on Wednesday, extending a sharp selloff in cryptocurrency prices.
In late afternoon trading bitcoin traded for $21,552, according to CoinMarketCap, marking a nearly 70% drop in value since the digital currency hit its all-time high of more than $67,000 last November. Analysts say the price has slumped as investors move out of cryptocurrency, which is highly volatile, into more stable assets.
Bitcoin and other cryptos surged last year as a growing number of Americans tried their luck, drawn by breathless media coverage and reports of the enormous returns some investors had realized. But now that the Federal Reserve is hiking interest rates in order to combat rising inflation, crypto's meteoric rise is starting to plummet back to Earth, said crypto skeptic Ben McKenzie.
"Bitcoin only exists in a low interest rate environment," McKenzie told CBS News' Dan Patterson. "It's pretty painful to watch, but I guess that's gravity for you."
Investors began to sour on crypto this spring, with confidence in the sector further undermined when the stablecoins terraUSD and luna lost their benchmark value of $1. And the selloff kicked into overdrive earlier this week when crypto platforms Binance and Celsius halted trades.
The rout has been broad and deep, with the value of ether, solana, tether and other major tokens following bitcoin down. The total market value of cryptocurrencies plunged below $1 trillion on Monday to $983 billion — the first time it has dropped below that mark since January 2021, according to CoinMarketCap.
Most bitcoin buyers hopped on the bandwagon last year as crypto's popularity soared, McKenzie said. Since then, many are likely to have lost money, research suggests. A May analysis from crypto firm Glassnode found that 40% of all bitcoin holders have lost money.
Some Wall Street analysts are skeptical cryptos will regain their momentum anytime soon. Oanda senior market analyst Craig Erlam said in a research note Wednesday that bitcoin prices will likely continue to drop as interest rates climb.
"Bitcoin isn't feeling the love at the moment, and I'm struggling to envisage a scenario in which that changes," he said. "There may still be a belief that bitcoin can thrive in the future, but something that offers little now beyond speculative rallies is going to continue to struggle. What once looked like solid support below $20,000 suddenly looks very unstable."
Cryptocurrency's extreme volatility undermines its use as an investment and store of value, critics argue. Count Microsoft co-founder Bill Gates among the doubters.
"I like investing in things that have valuable output," he said Tuesday at a TechCrunch event in California. "The value of crypto is just what some other person decides someone else will pay for it."
— CBS News' Dan Patterson contributed to this report