Cryptocurrency market hammered after bitcoin edges closer to dreaded threshold

Crypto investors are waking to sea of red as the entire market took an absolute hammering and bitcoin dropped towards a dreaded threshold.

Crypto investors are waking to sea of red this morning as the entire market took an absolute hammering overnight for the second time in just a few weeks.

The price of bitcoin fell sharply on overnight, approaching a dreaded $US30,000 ($A38,800) threshold it has not crossed since January and dragging other cryptocurrencies in its wake.

At around 2am, bitcoin fell 8.6 per cent to a value of $US31,501 ($A40,715), a level not seen since mid-May, when the volatile cryptocurrency temporarily lost 30 per cent in one session.

The second-largest cryptocurrency, ethereum, lost 11.2 per cent of its value, falling to $US2361 ($A3051).

Bitcoin’s value has recovered slightly since the drop, rising to $US33,738 ($A43,606) at around 7am today – but, across the board, almost all of the smaller cryptos have been battered overnight.

The Bloomberg Galaxy Crypto Index fell as much as 15 per cent before also paring losses by this morning. Altcoins such as ether, litecoin and EOS also dropped.

“Numbers that should be staggering for a single day’s performance are no longer a shock to those of us invested in the crypto universe,” Hugh Shields, an analyst at SpreadEx.com said, calling the market an “anomaly”.

No concrete reason appeared to explain the price drop on Tuesday, but some analysts pointed to the seizure of $2.3 million ($A3 million) worth of bitcoin belonging to the Darkside hackers by US authorities as a possible factor.

RELATED: Donald Trump brands bitcoin a ‘scam’

Bitcoin’s value fell by 8.6 per cent overnight before picking up again slightly.

The US managed to recover almost all the bitcoin ransom paid to the perpetrators of the cyber attack on the Colonial Pipeline last month.

The FBI was able to find the bitcoin by uncovering the digital addresses the hackers used to transfer the funds.

It is being seen as a sign that law enforcement is capable of pursuing online criminals even when they operate outside the nation’s borders – and, crucially, that crypto isn’t beyond government control.

“Moves by governments around the world to regulate the crypto space … are causing waves of concern,” analysts at Hargreaves Lansdown said.

While the FBI’s ability to track and recoup cryptocurrency goes against the whole decentralisation dream of bitcoin’s inception, others see the development as potentially positive for cryptocurrencies in the long-run and a step towards the coin becoming more widely accepted.

In the short-term, however, it doesn’t look good for crypto investors.

“Bitcoin can’t get a break,” Antoni Trenchev, managing partner and co-founder of Nexo, a crypto lender told Bloomberg.

“Big picture, what we’re experiencing here is a tedious, drawn out regulatory overhang which will continue to weigh on the bitcoin price.

“Ultimately it’s good for the industry – and crypto needs the right sort of regulation – but for short-termists out there, it’s probably best to look away.”

Are you not entertained? 📈📉🚨#cryptocurrencies#Bitcoinpic.twitter.com/N3ckM5SjkE

— Adam Badam 🙋🏽‍♂️ (@madmmlk) June 8, 2021

The sell-off could worsen if bitcoin prices fall below $US30,000 ($A38,800), according to Jeffrey Halley, senior market analyst for Asia Pacific at Oanda.

Breaking below that barrier would “basically put every long position since January 1 in the red, which I believe, will trigger another capitulation trade,” he wrote in a research note.

Cryptocurrencies were also given a slap-down by former US president Donald Trump, who called bitcoin a “scam” that was “competing with the dollar” during an appearance on Fox Business television.

Since the end of 2020, the price of bitcoin had been boosted by the interest of professional investors, from investment funds to large Wall Street banks. The electric vehicle manufacturer Tesla has also invested some of its cash in it.

Between the beginning of last year and a peak in mid-April of $US64,870 ($A83,822) , the price of bitcoin gained nearly 800 per cent. But since then, the cryptocurrency has fallen in value by more than 50 per cent.

The volatility is worrying some investors. The British fund Ruffer, which has a reputation for prudence, caused a stir when it invested in bitcoin in November.

But the fund said on Monday it had divested itself of its cryptocurrencies, pocketing $1.1 billion in profit in the process.

“Something like dogecoin is still valued at $US40 billion [$A52 billion],” Duncan McInnes, an investment director told the FT over the decision to sell.

Dogecoin, which was created as a parody cryptocurrency but is often promoted by billionaire Tesla boss Elon Musk, has had an even more turbulent year than bitcoin. Its price rose from less than 10 US cents (A13 cents) in January to nearly 70 cents (A90 cents) in May. It is currently trading at around 31 cents (A40 cents).

– with AFP