Cryptocurrency prices also fell abruptly. Bitcoin’s price fell to $26,000 on Thursday, 60 percent lower from its November high before rallying slightly. Since the beginning of the year, Bitcoin’s price movement has closely matched that of the Nasdaq, a benchmark heavily focused on technology stocks, suggesting that investors are treating it like any other risky asset.
The price of Ether also collapsed, losing more than 30 percent of its value in the past week. Other cryptocurrencies, such as Solana and Cardano, are also down.
Any panic may be exaggerated, some analysts said. A study by Mizuho showed that the average Bitcoin owner on Coinbase would not lose money until the price of the digital currency dropped below $21,000. According to Mr. Dolev, a true death spiral could develop there.
“Bitcoin worked as long as no one was losing money,” he said. “Once it gets back to those levels, it’s kind of an ‘Oh, my God’ moment.”
Professional investors who have endured the volatility of cryptocurrencies have also remained calm. Hunter Horsley, chief executive of Bitwise Asset Management, which provides crypto investment services to 1,000 financial advisors, met more than 70 of them this week to discuss the market. Many didn’t sell, he said, because all other assets fell as well. Some even tried to take advantage of the decline.
“Their position is, ‘This isn’t fun, but there’s nowhere to hide,'” he said.
Still, the plummeting prices have confused crypto traders. Just a few months ago, blockchain proponents predicted that the price of Bitcoin could soar to $100,000 this year.