Cryptocurrency crisis affects digital assets 1:09
New York (CNN Business)--
It's been an absolutely brutal year for investors in bitcoin and other cryptocurrencies.
Bitcoin has lost more than half its value in 2022. Now, with a price hovering around $23,000, it is nearly 65% down from last year's high of nearly $70,000.
The value of all cryptocurrencies has fallen from around $2.2 trillion at the end of 2021 to just over a trillion.
Bitcoin, the world's leading cryptocurrency, accounts for 42% of the total market, but 2022 has been just as difficult for owners of other crypto securities like Coinbase.
Shares of the cryptocurrency trading platform are down 75% so far this year.
Its competitor Robinhood's shares have lost half their value.
There is still hope that the worst is over.
Bitcoin has rallied more than 15% in the last week, with two major cryptocurrencies having an even bigger rally.
Solana is up more than 35% in the last seven days, while Ethereum is up almost 45%.
Ether, the second-highest-valued cryptocurrency, is widely used to finance acquisitions of NFTs, non-fungible tokens, the digital securities that have taken the world of collectibles by storm.
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Coinbase has also had a rally and was up 9% on Monday.
The software company MicroStrategy, which had almost 130,000 bitcoins in its account as of June 30, has seen a rally of more than 35% in the last five days.
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The rally in cryptocurrencies could serve as validation for defenders of the sector.
At the same time, it could be a reminder that the emerging market will remain volatile for now.
Expect more volatility
"We will see a longer-term rally in the digital asset sector, but I wouldn't get too excited just yet," said Joel Kruger, market strategist at LMAX Group. "This is still an emerging market."
Kruger said the recovery of bitcoin has lagged behind the larger bullish moves in ether and other smaller cryptocurrencies, and remains a near-term concern The broader group of cryptocurrencies and stocks will not be able to enjoy a more significant rally until there is “a rebound healthier" in bitcoin, he added.
So all the hype about bitcoin being the digital equivalent of gold is just that: hype and fanfare.
As an asset, bitcoin behaves much more like volatile tech stocks than much more stable commodities like gold or government-backed currencies like the dollar and euro.
Investors should also keep in mind that there may not be enough interest in cryptocurrencies to justify the thousands of coins, tokens, and exchanges out there.
If that is the case, only the strongest cryptocurrencies will survive and prosper.
“Cryptocurrencies have experienced a run similar to the dotcom era,” when many great ideas and companies were created, Adam Grealish, chief investment officer at wealth management firm Altruist, said in an email.
But a number of not-so-good ideas and companies were also launched, he added.
The same scenario is likely to apply to cryptocurrencies.
"With tougher markets, companies in weaker positions and with weaker business models will feel a lot of pressure," Grealish said.
The cryptocurrency market is on edge as Bitcoin tries to stay afloat
Don't tell crypto advocates.
The general rebound is lifting the shares of almost all companies linked to the sector.
Several cryptocurrency mining companies, which use computers to solve complex mathematical equations in order to generate new bitcoins, have risen sharply in recent days.
Marathon Digital was up 21% on Monday and is up more than 50% in the past week.
Riot Blockchain is up more than 40% in the last five days, while Hive Blockchain and Bitfarms are up 25% each.
So, have bitcoin, ether and major cryptocurrencies finally bottomed out?
There are some hopeful signs.
winners and losers
Two banks that provide cryptocurrency-backed loans and offer digital currency deposits, Silvergate Capital and Signature Bank, reported earnings and revenue on Tuesday that beat Wall Street forecasts.
It also seems that the turmoil in the sector has created a series of winners and losers among listed companies and startups.
Bitcoin and other cryptocurrencies crisis affects Coinbase and Robinhood
Cryptocurrency lender Celsius was forced to file for bankruptcy earlier this month.
However, privately held crypto giant FTX continues to thrive and is now valued at $32 billion.
FTX recently agreed to provide a line of credit to struggling cryptocurrency firm BlockFi, and the company's billionaire CEO Sam Bankman-Fried has talked about using FTX's financial muscle to bail out other struggling cryptocurrency firms as well. .
Bankman-Fried also has a stake in Robinhood, and there was recent talk that FTX might want to buy the struggling brokerage.
Bankman-Fried denied those reports to CNN Business.
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