Bitcoin’s Bear Market Hits New Investors Hard as Crypto Faces Setbacks

The latest bear market in Bitcoin has significantly impacted newer investors who rushed into the cryptocurrency during its peak last year, spurred by the hype surrounding Donald Trump’s U.S. presidential victory. Bitcoin, which reached an all-time high of $109,071 in January, has dropped to around $80,000, reflecting a nearly 25% decrease in value. This decline follows a broader global stock sell-off, leaving investors who bought at high prices facing heavy losses. New data shows over 20 million new Bitcoin addresses were created in the past three months, marking a sharp increase in the number of participants, many of whom used borrowed funds.

As the market plunges, recent Bitcoin buyers are locking in significant losses, with the ratio between prices of new Bitcoin purchases and sales dipping to its lowest in over a year. Analysts predict that the downturn will be particularly painful for those who invested recently, with leveraged traders suffering some of the largest single-day losses, reaching over $800 million in total. Investment products tracking Bitcoin have also seen consistent outflows, dropping assets under management to their lowest levels since mid-November 2024.

Despite some temporary boosts from U.S. government policies aimed at supporting crypto, such as the creation of a Bitcoin strategic reserve, the market’s volatility remains high. Bitcoin’s future volatility has surged to 69%, and its counterpart, Ether, has also seen a dramatic increase in volatility expectations. This has led analysts to anticipate continued market turbulence, with potential support for Bitcoin around the $73,500 mark.

In the longer term, experts suggest that the current market challenges are linked to broader economic issues, including concerns about U.S. tariffs, the health of the global economy, and a tech sector sell-off. Despite these setbacks, some analysts remain optimistic, drawing parallels to past market corrections that were followed by eventual recoveries. Investors are closely monitoring the equity markets, which are expected to continue influencing Bitcoin’s price movements.

SOURCE: REUTERS