Cryptocurrencies descended further into the red today as bitcoin crashed below $24,000 to its lowest level since December 2020.
Bitcoin is down by around 12.3 per cent over the last 24 hours, bringing 2022 losses to nearly 50 per cent and ethereum is down 16 per cent to $1,216, with total crypto market losses at around 14 per cent, according to Coinbase figures.
It comes amid a wider sell-off in riskier assets, with the FTSE 100 and FTSE 250 each down by around 2 per cent, and news that crypto lending platform Celsius Network has halted withdraws on volatility concerns.
Crypto crash: The price decline comes amid a wider sell-off in risk assets
The sell-off in riskier assets such as stocks and cryptocurrencies is in response to soaring inflation, with US CPI coming in higher than expectations last week at 8.6 per cent over 12 months, in addition to concerns of a slowdown in global growth.
Susannah Streeter, investment and markets analyst at Hargreaves Lansdown, said: ‘As inflation proves to be an even trickier opponent to beat than expected, bitcoin and ether are continuing to get a severe bruising in the ring.’
She adds: ‘They are prime victims of the flight away from risky assets as investors fret about spiraling consumer prices around the world.
‘The worry is that inflation is becoming too hot to handle by central banks who will be forced to douse economies with jets of freezing water, in the form of much steeper interest rate rises, to get it under control.
‘With the era of cheap money coming rapidly to an end, traders are becoming much more risk averse and turning their backs on crypto assets.’
Meanwhile, safer assets have rallied, with the US dollar up 0.5 per cent and 0.3 per cent against sterling and the euro, respectively.
Bitcoin’s latest decline puts into question crypto industry claims that the world’s largest digital currency is an effective hedge against inflation
Charlie Morris, founder of digital assets data platform ByteTree, said: ‘What gold and bitcoin have in common is that they are both hard assets, and that has an appeal during times during the market cycle.
‘I don’t see them as currencies – they are alternative assets, both of which behave like commodities.
‘Gold tends to see a premium building during risk-off conditions, and bitcoin during a risk-on.
The price of bitcoin spiked in November 2021, reaching nearly $68,000 a coin. Ethereum also peaked in the same month at nearly $3,500 a coin.
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