The price of Bitcoin dropped below the key $40,000 level, hitting $37,884 at 7:45 a.m. EST on Jan. 21, down 9.8 percent in the last 24 hours and more than 21 percent in the last 30 days, as a global market selloff spreads to cryptocurrencies.
Wall Street’s major indexes dropped into negative territory Thursday. The volatility has been blamed in part on the latest jump in bond yields, especially U.S. Treasuries, as investors continue to prepare for an accelerated tightening of U.S. Federal Reserve monetary policy. The market is now pricing in at least four interest rate rate hikes this year.
It didn’t help when Russia on Jan. 20 proposed a ban on Bitcoin mining and crypto trading activity, following China’s 2021 ban of the same. Expect more such government threats, experts said.
Ether is also down by nearly 12.6 percent in 24 hours, hitting $2,816. Other top-ranked coins by market capitalization such as Solana and Cardano have also been dragged down, posting declines of 15.5 percent and 13.9 percent respectively. The price of stablecoin Tether was up 0.2 percent and USD Coin was down 0.3 percent in the last 24 hours.
Bitcoin was trading at $38,401.70 as of this writing.
“Crypto markets have been sitting on a critical support level for some time,” Stack Funds told CoinDesk. “Macro market weakness is causing a sell-off in risk assets. Further continuation of this sentiment will likely see BTC trade in the mid ’30s.”
Support is a price level at which the crypto price tends to bounce back up after a down period. At this level, the demand picks usually up and prevents the price from falling down further as the buyers find the price attractive enough to buy and sellers are less willing to sell, according to TradeSanta.
“Market sentiment is pessimistic, and investors are in a wait-and-see mood,” Huobi director of research Li Hui told CoinDesk. The “decline was very fluid and there was no significant rebound after the support price was broken.”
Bitcoin is trading at levels not seen since August 2021. The declines followed a volatile session on Wall Street with stocks swinging from early gains to a selloff — a repeat of what happened Wednesday — pushing the Nasdaq deeper into correction territory, Marketwatch reported.
Historically, January has been a volatile month for 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,” Aslam said.
The No. 1 cryptocurrency is trading in lockstep with the tech-focused Nasdaq 100, with a correlation reading among the highest since 2011, Bloomberg reported — proof, “once again that its long-touted classification as an uncorrelated asset is more folklore than fact.”
A non-correlated asset is one whose value is not tied to larger fluctuations in the traditional markets. The Nasdaq 100 is seen as a proxy for risk sentiment.
“The 100-day correlation coefficient of Bitcoin and the Nasdaq 100 Index rose above 0.40, among the highest such readings going back to 2011,” Bloomberg reported. “A coefficient of 1 means the assets are moving in lockstep, while minus-1 would show they’re moving in opposite directions.”
Bloomberg presenter and podcaster Joe Weisenthal called for perspective. “Bitcoin is up over 100% since its 2017 peak. Totally respectable returns” he tweeted.
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?