By Clive McKeef
Bitcoin prices slumped further over the weekend to levels not seen since last August, as a selloff of riskier assets like stocks spread to cryptocurrencies. Bitcoin has now shed about 50% from its record high in November.
Bitcoin /zigman2/quotes/31322028/realtime BTCUSD -0.32% fell as low as $34,042.78 Saturday, a drop of 7.2%, before paring losses. The world’s largest cryptocurrency by value stabilized late Sunday, at one point back crawling back above the $36,000 level.
Other digital assets also stopped their skids Sunday, including Ethereum /zigman2/quotes/108573964/realtime ETHUSD -0.65% , Bitcoin Cash /zigman2/quotes/108573970/realtime BCHUSD -1.63% , Litecoin /zigman2/quotes/108573968/realtime LTCUSD -0.06% and Monero /zigman2/quotes/108573973/realtime XMRUSD +0.28% , according to Kraken data.
Bitcoin’s price had already taken a major hit on Thursday night into Friday, when it fell from around $43,000 to around $38,500. But that plunge continued even more on Saturday, taking it to a low around $34,000.
Bitcoin has now fallen nearly 19% over the last week. Other coins have seen even more dramatic losses: Ethereum is now down 27% over the past week.
Anyone that bought bitcoin at the start of the year has now seen it lose more than 24% of its value, in just three weeks.
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The declines in crypto prices followed a volatile session on Wall Street on Friday that saw stocks swing from early gains to a selloff, as investors repeated this week’s pattern of selling rallies, pushing the Nasdaq Composite deeper into correction territory.
“The pessimism continues to grow among investors and traders when it comes to riskier assets and this is chiefly influencing the price of equities and bitcoin,” said Naeem Aslam, chief market analyst at AvaTrade, in a note to clients.
“The thing with bitcoin is that when it begins to fall, the price action drops like there is no tomorrow,” said Aslam, who added that January also tends to be a volatile month for the cryptocurrency on a historical basis.
Aslam also cited a proposal from Russia’s central bank on Thursday to ban the use and mining of cryptocurrencies. Russia is one of the world’s leading bitcoin mining locations, and joins China, which imposed its own ban on activity last year.
Supporters had hoped in recent days that the $40,000 level would be an important psychological barrier, and that the price could stabilise above that level. Instead, it has dropped way below that, and continued to trade down.
“Many altcoins are into support at their summertime 2021 lows, making it critical that bitcoin holds support as it sets the tone for the cryptocurrency space,” Katie Stockton, managing director of Fairlead Strategies, a technical research firm, wrote in a Friday briefing.
The recent drop also means that the price is in danger of being down over the year. This time in 2021, bitcoin was trading around $33,000, though just days after that, it would see a price rally that would take it above $50,000 and see it perform strongly through most of the summer.
Bitcoin’s decline from its peak has wiped out more than $600 billion in market value, and over $1 trillion has been lost from the aggregate crypto market.
Crypto-centric stocks also dropped on Friday, with Coinbase Global Inc. /zigman2/quotes/225893452/composite COIN -0.08% at one point losing nearly 16% and falling to its lowest level since its public debut in the spring of 2021
Meanwhile, the Biden administration is preparing to release an initial government-wide strategy for digital assets as soon as next month, according to Bloomberg News , and task federal agencies with assessing the risks and opportunities that they pose, according to people familiar with the matter.
The argument Bitcoin is a form of “digital gold” is also falling apart.
As the world’s largest cryptocurrency slips to $34,000, the lowest price since August, its decline in tandem with risk assets such as tech stocks is casting a shadow on a long-touted similarity to gold.
Cryptocurrencies have plunged alongside equities in a rocky start to the year amid tighter-than-expected monetary policy, whereas gold, often heralded as a store of value and an inflation hedge, has steadily traded upward this month .
Earlier this month, analysts from Goldman Sachs argued that Bitcoin could rise to a $100,000 price point, if it could win more of the “store-of value” market from gold. Instead, the digital asset’s signature volatility has come to fore.