Crytpocurrency prices were mixed on Tuesday afternoon, with bitcoin trading around the $20,000 level. (Photo Illustration by Chesnot/Getty Images / Getty Images)
Bitcoin, the leading cryptocurrency, has taken a beating in 2022, continuing a decline that started in November last year. For most of the year, the value remained within touching distance of $40,000, but two large drops – one at the beginning of May and one earlier this month – brought the currency to less than one-third of that November high.
The currency spiked to new highs in 2021, with a dip for six months during which it was worth around $30,000 before hitting its all-time highest value.
Ticker Security Last Change Change % COIN COINBASE GLOBAL INC. 51.18 -4.78 -8.54% BITQ EXCHANGE TRADED CONCEPTS TRUST BITWISE CRYPTO INNOVATORS E 6.10 -0.34 -5.28%
Bitcoin and other cryptocurrencies have had some rough weeks in anticipation of and following rate hikes by the Federal Reserve as the central bank seeks to combat soaring inflation, which is at a high not seen in four decades.
The expectation now is that the Fed will continue to take aggressive action to try and curb inflation, which has reduced investor appetite to hold assets perceived as higher risk.
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This past year, tighter monetary policy has impacted both stocks and cryptocurrencies.
Gemini founders Cameron and Tyler Winklevoss have warned that the crypto industry is entering a "crypto winter," described as a "contraction phase settling into a period of stasis." The cryptocurrency exchange recently cuts its staff by 10%, citing "turbulent market conditions that are likely to persist for some time."
video Crypto regulation important for industry ‘maturation’: Expert
Domain Money founder and CEO Adam Dell provides insight into the crypto market and regulation.
Adding to more fears of volatility in the crypto market was the decoupling of the TerraUSD, a stablecoin whose value was tied to $1 last month. The world’s largest stablecoin by market cap, tether, also briefly edged down from its $1 peg.
Stablecoins are digital currencies with values that are pegged to traditional assets, like the dollar, another currency or gold. Its correspondence with the dollar is what, in theory, makes it stable. However, volatility in the crypto market challenged that presumption.
U.S. Treasury Secretary Janet Yellen told a House committee hearing last month that the sharp drop in crypto markets highlighted the need for additional federal regulation to respond to the wave of speculative investment in the currency whose secrecy is a major part of its attraction.
In addition, a top official at the SEC indicated that tighter rules around crypto stablecoins could be drawing closer, Reuters reported last month.
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"It is so important that this industry mature and regulation is an important step in that maturation," Dell stressed on Tuesday, noting that "there are a number of platforms out there that are engaged in activity that is highly speculative, and the underlying investor isn’t as familiar with those risks and that’s a dangerous combination."
He added that "it is important that investors appreciate the risks associated with this asset class."
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"At Domain Money, where we offer portfolios for both stocks and crypto, we encourage our investors to think clearly about the speculative nature of this particular asset class — and, while the returns can be spectacular, there is risk associated with that," Dell said.
FOX Business' Lucas Manfredi, Peter Aitken and The Associated Press contributed to this report.
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