Terrible Tuesday for Bitcoin as crypto tumbles 20 per cent in just two days with investors fleeing risk
The price of bitcoin fell by another 10 per cent overnight, hitting an 18-month low of $20,834.70, before recovering to trade around $22,700 by 9am UK time this morning.
In sterling terms, bitcoin is now trading around £18,665.
Discussing the violent movements with City A.M. this morning, Adrian Lowery, financial analyst at DIY investing platform and coaching service Bestinvest, said “these levels are a 20 per cent drop from bitcoin’s price on Sunday, and the lowest since December 2020, when bitcoin and other cryptos were soaring amidst the ‘risk on’ euphoria of the mid-stage pandemic.”
He explained that “the latest falls overnight were sparked by the same worries that have hit equity markets – a high inflation reading in the US on Friday and fears of steeper interest rate rises globally.”
Major US cryptocurrency lending company Celsius Network – which had been offering annual yields of up to 17 per cent on crypto holdings – froze withdrawals and transfers citing ‘extreme’ market conditions, only to be followed shortly afterwards by crypto trading giant Binance.
“Such moves will only add to jitters over the stability of the market in cryptocurrencies, which had already been stoked recently by the collapse of the Luna and Terra tokens,” Lowery said.
Not just Bitcoin
The world’s largest stablecoin Tether also temporarily broke its link with the US dollar last month.
“The steep falls in crypto values are aggravated by a further consideration, which is that it is a market – unlike equities – dominated by retail investors.”
Lowery added: “As inflation and growth fears have accumulated recently, investors have rapidly liquidated holdings, partly because they fear further price drops but also to shore up bank balances and safety-net savings.”
He concluded: “Long-term institutional investors in equities, while they have obviously been selling out of some markets, have not pulled the trigger to the same extent.”