Bitcoin’s 50% Drop Tests Markets as Retail Investors Continue Dip Buying

Bitcoin has lost nearly half its value since hitting a record high last October, which is the price of bitcoin. But the weakness is fueling fears of another crypto winter as it continues to struggle below $70,000.

But despite the ongoing volatility in the market, retail activity on Coinbase has remained steady, according to Brian Armstrong.

Post-October Slump

In a recent tweet, the Coinbase chief executive said that “the platform data shows retail users are still buying even though price dips as native unit holdings across Bitcoin and Ethereum increased.” In February, most retail customers had balances equal to or higher than their December levels (advanced by smaller investors on Coinbase), Armstrong added, adding that “the numbers of retailers who have been in the same position were steady.”

Although retail business looks strong, market commentator Mippo said the broader market outlook remains fragile. This is a “full-on crypto winter,” Mippo said, which could be as severe as 2022 bear market or even downturn in 2019 — given current conditions. The near-term pressure he blamed on the “air gap” created by previously unsustainable valuations along with an evolving regulatory environment.

His statement was that “historical crypto valuations are largely driven by speculative capital flows rather than business fundamentals,” as regulatory uncertainty made it difficult for projects to generate consistent revenue or cash flows. A limited supply of tokens tied to the most popular stories at the time was often negotiated by prices, and higher-risk themes were generally more likely to be valued.

But this framework is now ‘breaking down’ as regulatory pathways for crypto projects become more clear, starting with stablecoins and expected to be extended to a wider range of tokens, Mippo said.

Mippo said while he described this regulatory change as “good” over the long term, it makes challenges for projects where valuations were built primarily on speculation. As compliant revenue generation becomes possible, he said that market participants are increasingly focused on cash flows and this has led to a review of token prices which were too high under earlier assumptions. This helps explain why on-chain activity and fundamental usage are growing as token prices continue to fall, he added ‘It is also important for me to understand how the price of tokens may be increasing.

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AI Dominance Pressures Crypto

Similarly, Mippo said crypto is being “absolutely mogged by AI” while adding that the frenzy about meme coin speculation has been following up with industry and that “crypto did not build useful products at that time.”

As such, he said the reset in valuations could continue for another nine to eighteen months before more general market conditions begin to improve.

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