The world's oldest cryptocurrency, Bitcoin, sunk to a low of $72,096.20 on Wednesday, experiencing a decline of over 5% in a single day. It was last observed trading at $72,958.38, reflecting a daily decrease of about 4%. Currently, Bitcoin is over 40% down from its peak of approximately $126,000 reached last October.
This significant dip brought Bitcoin close to the $72,000 mark, marking the second consecutive day of notable decline this week. Initially, Bitcoin fell below the $73,000 level on Tuesday, reaching its lowest point in around 16 months and edging toward its value before the election period. According to a Citi note to clients dated Tuesday, the $70,000 level is considered crucial as the cryptocurrency's downturn intensifies.
The decline in Bitcoin's value is influenced by various geopolitical and economic challenges among other adverse conditions. Key factors include investors' recent move away from riskier assets amid escalating tensions between the U.S. and Europe over U.S. President Donald Trump's Greenland strategy and the recently resolved partial government shutdown, which delayed the release of essential economic data. In addition, expectations of a shift in U.S. monetary policy following Trump's recent nomination of Kevin Warsh as the Federal Reserve chair and a slowdown in efforts to advance more crypto-friendly regulatory and legislative frameworks in the U.S. contribute to the downturn.
Recent reports from Deutsche Bank highlight that large institutional outflows, driven by the anticipation of a further Bitcoin correction, have reduced liquidity for the token, negatively impacting its price. Spot bitcoin exchange-traded funds have also seen significant withdrawals following the liquidation of highly leveraged digital asset positions last October, with outflows exceeding $3 billion in January, approximately $2 billion in December, and nearly $7 billion in November.
Bitcoin's price decline has also affected several cryptocurrency stocks. A company involved in Bitcoin treasury management, Strategy, reported a 5% decline on the same day, while digital asset mining companies like Riot Platforms and MARA Holdings saw losses of nearly 11%.