As a selloff of perceived riskier assets moved to cryptocurrencies, bitcoin prices were trading at levels not seen since August, sliding below a critical support level on Friday.
Bitcoin BTCUSD, -5.91 percent, the world’s most valuable cryptocurrency, fell more than 7% to $39,010, dropping below the crucial $40,000 threshold in a plunge that began late Thursday. According to Kraken statistics, Ether ETHUSD, -6.84 percent, which operates on the Ethereum blockchain, plunged 8% to $2,878, while XRP XRPUSD, -5.70 percent, Bitcoin Cash BCHUSD, -6.25 percent, Litecoin LTCUSD, -6.71 percent, and Monero XMRUSD, -3.56 percent all saw significant losses.
The drops came after a tumultuous afternoon on Wall Street, which saw stocks swing from early gains to a selloff, reversing Wednesday’s performance and pushing the Nasdaq Composite COMP, -1.30 percent deeper into correction territory.
In a message to customers, Naeem Aslam, chief market analyst at AvaTrade, stated, “Pessimism continues to develop among investors and traders when it comes to riskier assets, and this is primarily influencing the price of shares and bitcoin.”
“The problem about bitcoin is that when it starts to fall, the price action lowers like there’s no tomorrow,” Aslam said, noting that January has historically been a tumultuous month for the cryptocurrency.
He attributed the decline to a number of causes, including bitcoin’s and other crypto’s declining reputation as inflation hedges, as the Federal Reserve and other global central banks are likely to begin tightening policies to bring inflation under control.
Aslam also mentioned a suggestion made by Russia’s central bank on Thursday to prohibit cryptocurrency use and mining. Russia is one of the world’s most popular bitcoin mining locations, and it has now joined China in banning the activity.
Because of the Russian plan, Oanda senior market analyst Edward Moya predicted that bitcoin would go below $40,000 on Thursday.
According to Aslam, the adoption mechanism is similarly delayed.
According to Aslam, the adoption process has slowed. “When Elon Musk revealed that people could buy Tesla TSLA, +0.06% with bitcoin, it drove up the price of bitcoin. Prior to that, we learned that PayPal PYPL, -0.16% had begun to take bitcoin. The bitcoin price benefited greatly from these kind of news waves. Today, we are missing all of that, and as a result, the bitcoin price is decreasing in order to find love among traders,” he explained.”
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Bitcoin prices have dropped by 16 percent in January and by 36% in the last three months.