Bitcoin fell below $30,000 on Tuesday for the first time since June 22, dragging other digital coins lower and wiping nearly $100 billion off the entire cryptocurrency market in 24 hours as of 12:29 a.m. ET.
The flagship cryptocurrency was down more than 6.0 per cent while ether fell nearly 9.0 per cent and XRP tanked almost 10 per cent, according to CoinDesk data.
The fall comes after Wall Street was hit hard Monday by anxiety over the recent spread of Covid-19 and the threat it poses to the economic recovery. The Dow Jones Industrial Average plummeted about 725 points, a drop of 2.1 per cent. The S&P 500 ended the day down 1.6 per cent and the Nasdaq was 1.1 per cent lower.
Asian markets followed the skid on Tuesday, with Japan's Nikkei 225 falling nearly 1.0 per cent. Hong Kong's Hang Seng Index tumbled 0.8 per cent. South Korea's Kospi slumped 0.4 per cent, while China's Shanghai Composite was flat.
"Bitcoin is the ultimate risky asset right now and it could see intense selling pressure if Wall Street enters into panic selling mode," wrote Edward Moya, senior market analyst for the Americas at Oanda, in a research note.
"All signals are red as BTC (bitcoin) continues to be weighed down by China's ultimate crypto ban and worsening macro-economic conditions from a surge in Covid variants," said Jehan Chu, founder of cryptocurrency-focused venture capital and trading firm Kenetic Capital.
Regulators around the world are also looking more closely at the crypto space.
Bitcoin and other cryptos have had a tough year, having been gripped by extreme volatility in recent months. In June, bitcoin plunged below $30,000 for the first time since late January.
The latest drop came as investors worried about the impact of the Delta variant on the reopening of the global economy. Shares in airlines, cruise lines and energy stocks all took a dive in the United States on Monday. Long-term bond rates continued to slide as well, a sign that fixed income investors are now far more worried about a Delta variant-induced economic slowdown than they are about rising inflation fears.
A renewed crackdown in China on cryptocurrency trading and mining has weighed on the bitcoin price.
Major regions responsible for bitcoin mining in China have forced operations to shut down. Bitcoin mining is an energy-intensive process that facilitates bitcoin transactions and creates new coins.
China's central bank has also spoken to finance and fintech companies reminding them not to offer crytpo-related services to customers.
China banned local cryptocurrency exchanges in 2017 forcing them to move offshore. That did not stop Chinese traders buying and selling digital coins. But the tough actions this year from Chinese regulators has looked to further tighten restrictions on trading and mining.
"All signals are red as BTC (bitcoin) continues to be weighed down by China's ultimate crypto ban and worsening macro-economic conditions from a surge in covid variants," said Jehan Chu, founder of cryptocurrency-focused venture capital and trading firm Kenetic Capital.
Binance, the world's largest cryptocurrency exchange, last month was barred by the UK authorities from carrying out any regulated activities in the country. Regulators in Japan, Canada and Thailand have also issued warnings about Binance.
"In general we're seeing more regulatory focus on crypto and bitcoin," said Vijay Ayyar, head of business development at cryptocurrency exchange Luno.
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