The worldâs oldest cryptocurrency, Bitcoin, experienced a significant decline, dipping to a low of $72,096.20, marking a drop of over 5% within the day. It later stabilized slightly to trade at $72,958.38, a decrease of about 4%. Currently, Bitcoin is trading more than 40% below its record high of approximately $126,000, reached last October.
This downturn marks a second consecutive day of substantial losses for Bitcoin, as it nearly touched the $72,000 level on Wednesday. The cryptocurrency slipped below $73,000 on Tuesday, reaching its lowest point in about 16 months and nearing its pre-election values. Analysts from Citi highlighted in a Tuesday note to clients that $70,000 is viewed as a crucial threshold amidst Bitcoinâs continuing decline.
Bitcoin's devaluation is influenced by several geopolitical and economic issues. Key among these are investors moving away from riskier assets due to escalating tensions between the U.S. and Europe, sparked by U.S. President Donald Trumpâs controversial stance on Greenland and a recently concluded partial government shutdown that delayed key economic data releases. Additionally, expectations of a U.S. monetary policy change following Trumpâs Federal Reserve nomination of Kevin Warsh last month, as well as delays in establishing regulatory frameworks supportive of cryptocurrency in the U.S., are impacting Bitcoin's performance.
Moreover, substantial institutional outflows in anticipation of a deeper Bitcoin correction have reduced the digital currency's liquidity, exerting downward pressure on its price, as indicated in a recent Deutsche Bank analyst report.
Significant outflows have been recorded from spot Bitcoin exchange-traded funds, following the liquidation of several leveraged digital asset positions last October. Fund outflows amounting to over $3 billion were observed in January, about $2 billion in December, and approximately $7 billion in November, according to analysts.
Bitcoin's decline has also impacted related crypto stocks. The Bitcoin treasury firm, Strategy, reported a 5% drop, while companies involved in digital asset mining, such as Riot Platforms and MARA Holdings, saw losses of nearly 11%.