Bitcoin has fallen below $70,000 for the first time since November 2024, wiping billions off the cryptocurrency market. The world's largest digital asset dropped nearly 8% in the past week, bringing its year-to-date losses to almost 20%. Ether also declined, trading at around $2,090, down nearly 30% this year.
Analysts attribute the latest rout to the nomination of Kevin Warsh as the next Federal Reserve Chair, which has raised expectations of a shrinking Fed balance sheet. Cryptocurrencies have historically benefited from a large balance sheet, as increased liquidity supports speculative assets. 'The market fears a hawk with him,' said Manuel Villegas Franceschi of Julius Baer. 'A smaller balance sheet is not going to provide any tailwinds for crypto.'
The global crypto market has lost nearly $1.9 trillion since its peak of $4.379 trillion in early October, with $800 billion wiped out in the last month alone, according to CoinGecko. Deutsche Bank analysts noted that institutional ETF outflows have been a key driver, with US spot bitcoin ETFs seeing over $3 billion in outflows in January, following $2 billion and $7 billion in December and November respectively. 'This steady selling suggests traditional investors are losing interest,' they said.
Bitcoin's decline has been exacerbated by a broader sell-off in tech stocks, as the digital asset's fortunes have become tied to the sector. Jefferies strategist Mohit Kumar warned of potential forced liquidations among crypto miners if prices continue to fall, which could create a vicious cycle. 'Our view on crypto has always been that it should be never more than a very small portion of the overall portfolio,' he added.
