Holders of cryptocurrencies have definitely seen better days, as popular tokens like $BTC and $ETH , amongst others, saw major price declines of almost 20% in a span of a couple of weeks. The FUD (fear, uncertainty and doubt) spreading like wildfire in the crypto space can be attributed to two key reasons.
ByBit's Massive Hack
Bybit — known as one of the largest cryptocurrency exchanges in the world — just suffered a massive hack of $1.5b worth in tokens. To understand the magnitude of this situation, this particular ByBit hack is now known to be the 'biggest digital heist in history', making previous hacks of cryptocurrency exchanges look minor. It is rumoured that the crypto heist was orchestrated by North Korean hackers — something that has happened before in the past. The fact that a hack of this severity is still possible in today's crypto space has instilled large amounts of fear among crypto investors, who have begun selling off their holdings in various tokens to convert them back to fiat. The security issue present in the crypto space has long been a concern among investors, and a hack of this severity certainly injects more bearish sentiment.
Falling Equity Markets
Cryptocurrencies are well-known to function as risk assets, exhibiting non-negligible levels of correlation with equity markets. With equity markets falling in the past few weeks after Trump's tariff announcements, we can see that the prices of established tokens like Bitcoin and Ethereum have followed suit. Generally, in times of market uncertainty, investors tend to flock to safer investments — think bonds, REITs, time deposits, or even equities in less affected countries. The highly speculative nature of cryptocurrency token prices makes these tokens one of the first on the chopping block, with people rapidly divesting their cryptocurrency holdings to rotate into 'safe havens'.
What should you do?
Well, it depends on why you're holding cryptocurrencies in the first place. For traders, the tremendous increase in volume presents numerous profit opportunities. For long-term holders, it may be prudent to re-evaluate your asset allocation based on your respective risk appetites. Cryptocurrency prices have shown resilience in the past, even in tumultuous situations like these. However, much needs to be done to renew investor confidence in the cryptocurrency market.
