Bitcoin and Ethereum Suffer Worst Annual Start in a Decade, Though a Recovery Is Anticipated
Despite posting slight increases on Friday, the two leading cryptocurrencies globally are experiencing their most historically poor beginning to a year. Bitcoin has declined by nearly 24% since January 1st to its current level of approximately $67,000, while Ethereum has also dropped roughly 34% to around $2,000. An analysis of CoinGecko’s public data, which extends back to mid-2013 for Bitcoin and mid-2014 for Ethereum, confirms these as the weakest year-to-date performances ever recorded.
While cryptocurrency price movements have frequently mirrored the wider stock market, these two asset classes have moved in opposite directions over the last two months. Since January, the equities market has seen a slight uptick. The S&P 500 has gained about 0.4%, and the Dow Jones Industrial Average has increased by 2.3%. Even precious metals, which hit a record high nearly three weeks ago, are showing strength. Gold has surged approximately 17% since the start of the year, and silver has climbed about 14%.
The crypto market’s deviation from broader economic growth has prompted many to declare the arrival of a new “Crypto Winter”—despite Bitcoin reaching all-time highs just four months prior.
“We’re certainly in a Crypto Winter,” stated Danny Nelson, a research analyst at the crypto asset management firm Bitwise. “You can tell by how investors react to good news. (They don’t.)”
Downturns and losses
The year-to-date crashes in the prices of Bitcoin and Ethereum come after an event on October 10th, subsequently labeled a “flash crash,” where traders witnessed over $19 billion in leveraged positions get liquidated following renewed tariff threats against China from President Donald Trump. The single-day market collapse was the most severe liquidation event ever recorded by the crypto analytics company Coinglass.
The industry has faced challenges ever since. Bitcoin has fallen more than 46% since the beginning of October. Cryptocurrency exchanges reported disappointing fourth-quarter results. Furthermore, some traders are facing significant losses. BlockFills, a crypto lender and hedge fund, halted customer withdrawals in early February. The company is now seeking a buyer and has incurred losses exceeding $75 million, according to reports.
A spokesperson for BlockFills declined to comment.
The prolonged decline has left many in the crypto space puzzled. Earlier bear markets were triggered by specific failures, such as the collapse of FTX in November 2022. However, there has been no clear catalyst for the recent slump, particularly as the crypto industry is experiencing unprecedented regulatory acceptance in the U.S. and Wall Street adopts the asset class more widely.
This situation has provided a basis for optimism among some analysts. “Crypto’s reality is getting stronger,” remarked Nelson, the Bitwise research analyst. “These changes are going to last well beyond the current downturn.”
His sentiment is shared by Tom Lee, cofounder of the analysis firm Fundstrat and a well-known Ethereum supporter, who suggested in a recent interview that, “We’re really close to the end.”