VOT Research Report
Market Analytics and Considerations
The winter chill is returning to the crypto business.
It’s clear that Bitcoin is undergoing one of the largest falls in history. But the Flow Show research note from Bank of America Research has calculated the numbers and presented them in terms of history: In terms of scope, it ranks as the sixth lamest asset catastrophe in financial history, behind only the Mississippi & South Sea Co. It was so long ago—the early 1700s—that the United States did not yet exist and the United Kingdom was engaged in the War of the Spanish Succession. History aficionados would refer to that incident as the South Sea Bubble.
Bitcoin, which accounts for 41% of the crypto space, experienced lows not seen since the pandemic’s nadir two years ago. A market collapse is back in full swing with FTX’s collapse, which caused the cryptocurrency exchange to file for bankruptcy and its founder and CEO Sam Bankman-Fried to resign—a far cry from a few months ago, when he was compared to J.P. Morgan for his intended rescue missions of troubled firms. This is true even though the market recovered after May’s Crypto Winter.
According to BofA’s analysis of Bloomberg data, the decline in the value of Bitcoin is the fifth-largest crash ever documented and unquestionably the worst ever since 1970s.
Source: Bofa GLOBAL RESEARCH
In the wake of FTX’s collapse, Bitcoin has experienced a 77% drop from its top trading level of $70,000 in November of previous year. The market cap for cryptocurrencies has fallen from $3 trillion to $900 billion in the meantime.
It reminds us of the dotcom crash from twenty years ago, which BofA assesses to have seen a decrease of 76% from its apex in March 2000 (only 1% lower than Bitcoin’s decline). Investments made in online businesses during the 1990s bull market, when the internet was still relatively new, served as the gasoline for the dotcom bubble.
The Nasdaq index expanded quickly, but in 2000 the bubble popped as a result of businesses that had amassed a lot of money but nothing in the way of a business plan simply running out of cash. With the fall, Nasdaq’s five-fold rise plummeted, and billions of dollars were destroyed. Crypto opponents claim the parallels are plain to see.
The end of the Roaring ’20s and “Black Monday,” the stock market plunge that sparked the Big Depression, are another great bubble that barely beats out Bitcoin.
The economic developments of 100 years ago are comparable to those of today. After the First World War, the American government spent more money than it collected in taxes, which led to significant inflation. However, when the United States became a prominent role on the world stage, its industrial might led to a massive increase in employment.
Similar to today’s extraordinarily strong dollar serving as the world’s reserve currency, the disparity of global trade brought on by the use of the reference standard and the fact that America actually possessed the majority of the world’s gold perplexed central bankers’ reactions to the crash and made the recession into a depression. According to BofA’s calculations, the Dow Jones Industrial Average index fell 89%, outperforming even Bitcoin’s decline.
According to estimations by BofA, we have seen the stocks of US homebuilders tumble in recent years, falling 83% from a peak in 2005. Three years after the apex, a period of tremendous expansion came to an end, and the 2008 financial crisis followed.
Bitcoin is presently trading at about $16,800, area is near 3percent over the past 24 hours and 19percent over the past week.
