Sudden crypto drop sends bitcoin to three-week low

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Illustration shows representations of cryptocurrencies

By Tom Westbrook and Hannah Lang

SINGAPORE/WASHINGTON (Reuters) -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% to $21,404 over a few minutes during the European morning, at around 0640 GMT. It recovered slightly to trade around $21,528 at 1651 GMT, down 8.05% on the day.

Ether was last down 8.32% 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% 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% 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.

(Reporting by Tom Westbrook, Elizabeth Howcroft, Samuel Indyk and Hannah Lang; Editing by Kirsten Donovan and Tomasz Janowski)

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