Bitcoin fell to a six-month low on Saturday, prolonging a sharp decline recorded in the previous session as the cryptocurrency market was swept up in a powerful shift by investors from speculative assets.
The price of the largest digital sign by market value fell 4.3 percent on Saturday morning to $ 35,127, the lowest level since July 2021. Bitcoin has now lost almost a quarter of its value this year.
Other cryptocurrencies also came under intense selling pressure, with a FT Wilshire index of the top five tokens excluding bitcoin falling 30 percent in the first month of 2022.
The cryptocurrency route comes as investors dumped shares in technology companies on expectations that the US Federal Reserve would move to curb loose pandemic monetary policy to curb inflation. World stock markets showed their biggest declines in more than a year this week, with the fast-growing companies driving the rally out of the depths of the coronavirus crisis, which endured intense declines.
Investors are now predicting that the Fed, the world’s most influential central bank, will raise interest rates three to four times this year, something that has boosted bond yields. Higher returns on low-risk assets such as US government bonds make the potential returns that can be earned through speculative investments such as cryptocurrencies seem less attractive, analysts say.
Andrew Sullivan, managing director at Outset Global in Hong Kong, said Asia was seeing “large volumes going through a number of markets on Friday as investors switched to cash” as technology stocks in the region fell.
The sharp sales of digital assets also came a day after the Russian central bank announced draft proposals on Thursday try to ban all cryptocurrency trading and mining. The proposed regulations will also block cryptocurrency investment by banks and prohibit any exchange of cryptocurrencies for traditional currencies in Russia, one of the world’s largest centers for cryptocurrency mining.
The central bank said in its 36-page report that the rapidly rising value of cryptocurrencies “is primarily defined by speculative demand for future growth, which creates bubbles”, adding that they “also have aspects of financial pyramids because they price growth is largely supported by the demand for new entrants to the market ”.
The announcement initially had little impact on bitcoin, which rose as much as 3.7 percent against the dollar on Thursday. But by Friday afternoon in Asia, the crypto-currency had fallen more than 10 percent from the previous day’s high to reach its lowest level since August.
“Russian regulators are frustrated [with the cryptocurrency industry] for several years and their warnings were not heeded, ”said Vince Turcotte, Asia-Pacific sales director at Eventus Systems.
He added that although the Russian proposal was “relatively stricter”, it was only the latest in a series of announcements on cryptocurrencies by regulators around the world focused primarily on protecting retail investors.
Turcotte compared the situation in Russia to that of China before Beijing began a more powerful suppression of the industry. “Nobody listened to [Chinese officials] until they really brought down the hammer, ”he said. Last year, China declared all crypto-activities illegal.
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