Recently, the decline of Bitcoin is obviously stronger than other cryptocurrencies such as Ethereum, which may highlight the increasingly close relationship between Bitcoin and the macro situation. On Saturday, Bitcoin once fell by 21%, and now it is close to $48,200, which is about 10% lower than last Friday's closing price. Ethereum fell by 17% on Saturday, then began to pick up, and soon recovered to more than 4,000 US dollars. Sean Farrell, director of digital asset research at Fundstrat, said in a report on Sunday that compared with bitcoin, other cryptocurrencies recovered from events that caused macro uncertainty much faster. These events include the omicron variant, the accelerated downsizing of the Federal Reserve and the changes in the derivatives market. In the past year or so, with the maturity of the market, the increase of products and the gradual clarity of judicial supervision, large investors have been accelerating the purchase of bitcoin. This is usually considered as a factor that may boost bitcoin prices, but the recent plunge shows that the entry of big players can be a double-edged sword.
The weekend's plunge may become a turning point. The previous analysis of Cornerstone Macro found that the downside risk of Bitcoin is not as great as that of Ethereum. However, as institutions begin to flood into Bitcoin, Bitcoin may be more susceptible to capital flow. "Ethereum is usually associated with the growth of encryption sub-sectors such as decentralized finance (DeFi) and non-homogeneous tokens (NFTs), but has little connection with anti-inflation transactions, so it is not negatively affected by the hawkish remarks of the Federal Reserve." Stephane Ouellette, CEO and co-founder of FRNT Financial Inc． said on Sunday. The weekend's plunge once again reminded people that cryptocurrency is a developing asset class and can be extremely unstable. Nevertheless, Ethereum has increased more than fivefold so far this year, bitcoin has increased by about 70%, while S&P 500 index has increased by 20% and MSCI global index has increased by 11%. The total return of Bloomberg Barclays Global Composite Bond Index is slightly negative. The increasing institutionalization of bitcoin "may explain why there was a sharp sell-off in the bitcoin market last Friday night," said Farrell of Fundstrat. "Traditional institutions hope to maintain annual revenue before the end of the year."
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