Bitcoin Weakness Sees Investors Seek Safer Crypto Stablecoins
2022 has gotten off to a rough start for many investors, with ongoing supply chain issues, talk of additional Fed rate hikes, and the latest Covid-19 variant spooking the markets.
Investors who thought the crypto markets would offer some protection were sorely mistaken. After peaking in November at nearly $68,000, Bitcoin (BTC) has been in steep decline ever since. The low saw it dip below $42,000 in the first week of 2022, a nearly 38% decline from its high.
The overall crypto market has not fared any better, with the global crypto economy dipping 4.5% in a single day recently. Ethereum (ETH), the 2nd largest cryptocurrency, has had an even worse start to 2022 than Bitcoin; it’s down nearly 16% in the first ten days of the year. Even Elon Musk’s cryptocurrency of choice, Dogecoin (DOGE), is down 18% in 2022.
The one area of the crypto economy that held up better than the rest was the stablecoins. Stablecoins, such as Tether (USDT), which are tied to underlying assets like gold or the U.S. dollar, have been a popular choice for investors fleeing coins that are seen as riskier. While everything else has been in freefall, these coins have been trading relatively flat.
This trend towards less risky crypto assets is likely to continue in the near term, as the uncertainty in the overall market shows no signs of abating. Investors shouldn’t be surprised if Bitcoin and other major cryptocurrencies drift lower while stablecoins continue to tread water while riding out the storm.
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Disclaimer: Wealthy VC does not hold a position in any of the stocks, ETFs or cryptocurrencies mentioned in this article.
