Cryptocurrencies fell sharply on Friday, with sudden selling dragging bitcoin to a three-week low, with analysts divided over the reason behind the decline.
Bitcoin fell as much as 7.7 per cent to $21,404 over a few minutes during the European morning. It recovered slightly to trade around $21,528, down 8.05 per cent on the day.
Ether was last down 8.32 per cent at $1,721.
Marcus Sotiriou, analyst at digital asset broker GlobalBlock, in a research note said there did not appear to be a single catalyst that led to the heavy selling.
“But the S&P 500 rejecting and failing to continue its recovery contributed to bitcoin’s drop,” he said. The S&P 500 was down around 1 per cent by early Friday afternoon.
Meanwhile, Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, suggested the move was a “result of a large sale transaction.”
“It’s not showing the pattern of a flash crash, as the assets didn’t immediately rebound sharply but sank even lower in the hours that followed,” she said.
Streeter said it appeared the cryptocurrency cardano had been the first to move, followed by bitcoin and ether, and then others such as the altcoin dogecoin.
Cryptocurrencies have fallen dramatically so far this year, as Federal Reserve rate hikes and ultra-high inflation prompt investors to ditch riskier assets.
Craig Erlam, senior market analyst at Oanda, said bitcoin’s failure to recover its losses “suggests there is substance to the move”.
Such sharp moves are common in the highly volatile cryptocurrency market. On June 15, bitcoin plunged more than 15 per cent as investors were spooked by the collapse of a so-called stablecoin, TerraUSD, and a major crypto lender freezing customer withdrawals.
Friday’s move put bitcoin on track for its worst day since the June meltdown.
“Speculating in cryptocurrencies is extremely high risk and is not suitable for the vast majority of people,” Hargreaves Lansdown’s Streeter said.