January Selloff Wiped $500 Billion Off Crypto Market Cap

Since the beginning of the year, the market value of cryptocurrencies has decreased by approximately $500 billion, plummeting from $2.2 trillion to $1.68 trillion. Tokens across nearly all categories saw double-digit percentage losses as the prospect of imminent interest rate hikes spooked investors in both crypto and equity markets.

Two leading cryptocurrencies, bitcoin and ether, shed 22% and 32% respectively over the past month. At present, they are hovering at $37,030 and $2,541. 

Consequently, assets under management for digital asset investment vehicles, including exchange and over-the-counter (OTC)-traded products such as the Grayscale Bitcoin Trust and Purpose Bitcoin ETF, have fallen from $58.6 billion in December to $43.9 billion (as of January 27) — an even further drop from the high of $74.7 billion in October, according to cryptocurrency market data provider CryptoCompare. 

Bitcoin products experienced the largest outflows with a weekly average of $49.3 million, followed by Ethereum products with an average of $28.2 million.

CryptoCompare’s data shows that January’s average daily trading volume has also dropped 14.5% to $481 million. 

Though Morgan Stanley noted that bitcoin’s 50% drop from November’s all-time high is nothing new and the correction falls within historical norms in its latest research note, senior IMF official Tobias Adrian warned of “destabilising” capital flows in emerging markets and “immediate and acute risks” posed by cryptocurrencies’ volatility. Last week, the IMF urged El Salvador to stop recognising bitcoin as legal tender. Bloomberg estimates the country has bought at least 1,801 coins.