Bitcoin prices were trading at levels not seen since August, pushing below a key support level on Friday, as the sell-off in perceived riskier assets spread to cryptocurrencies.
Bitcoin
USDBTC,
the world's largest cryptocurrency by market capitalization, slid more than 7% to $39,010, taking it below the key $40,000 level in a slide that began Thursday night. Ether
ethusd,
which runs on the ethereum blockchain, fell 8% to around $2,878 and XRP
XRPUSD,
bitcoin cash
BCHUSD,
litecoin
LTCUSD,
and Monero
XMRUSD,
all posted heavy losses, according to Kraken data.
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The declines followed a volatile session on wall street which saw stocks go from early gains to a sell-off, repeating Wednesday's action and in particular for the Nasdaq Composite
comp,
which pushed deeper into correction territory.
โPessimism continues to grow among investors and traders when it comes to riskier assets and this is primarily influencing the price of stocks and bitcoin,โ Naeem Aslam, chief market analyst at AvaTrade, said in a note to clients.
โThe thing with bitcoin is that when it starts to drop, the price action drops like there is no tomorrow,โ Aslam said, adding that historically, January also tends to be a volatile month for the cryptocurrency.
He blamed the drop on several factors, including a growing loss of status as an inflation hedge for bitcoin and other cryptocurrencies, and the Federal Reserve and other global central banks are expected to begin reining in inflation with tighter policy.
Aslam also cited a proposal from Russia's central bank on Thursday. to prohibit the use and mining of cryptocurrencies. Russia is one of the world's leading bitcoin mining locations, joining China, which imposed its own ban on activity last year.
Oanda Senior Market Analyst Edward Moya had predicted on Thursday that Bitcoin could drop below $40,000 due to the Russian proposal.
The adoption mechanism also remains slow, Aslam said.
Aslam said the adoption mechanism seems to have slowed down. โWhen Elon Musk announced that consumers could buy Tesla
TSLA,
with bitcoin, he drove up the price of bitcoin. Before that, we had news that PayPal
PPPL,
started accepting bitcoin. Those kinds of news waves were very supportive of the bitcoin price. Today, we are missing all of that and therefore the price of bitcoin is falling to find love among traders,โ he said.
Read: Dogecoin flies after Elon Musk tweets that some Tesla products can be bought with the meme coin
Bitcoin prices fell 16% in January and have plunged 36% in the last three months.
