The bitcoin price was set for its biggest one-week fall since September on Friday morning, having slipped around 9% since Monday.
Bitcoin – which hit an all-time high of close to $42,000 on January 8 – tumbled to around $28,000 in early Asia trading.
But it then recovered to around $32,537 by Friday morning. That means it is down about 9.2% since Monday, putting it on course for the the biggest weekly drop since declining by 12% in September, according to TradingView data.
Should the price tumble back towards the lows seen in the Asia session, the bitcoin price could be heading for its worst week since it crashed 33% in March 2020.
Bitcoin came under selling pressure this week after Janet Yellen, Joe Biden’s pick for Treasury secretary, suggested the use of cryptocurrencies should be “curtailed” because they were used mainly for “illicit financing”.
Many analysts put bitcoin’s overnight slide down to a report by BitMEX Research that suggested a flaw called “double spend” – when someone is able to spend the same coin twice – had occurred in the cryptocurrency’s blockchain.
Yet BitMEX later said it the double spend could have in fact been another type of less worrying transaction.
Bitcoin has soared in recent months, rising from a 2020 low of below $4,000 in March to more than $41,000 earlier this month. Overall, it is up around 290% in the last year.
Advocates say cryptocurrencies are fast becoming safe-haven assets that can protect investors’ portfolios against the risk of inflation and currency devaluation triggered by the unprecedented fiscal and monetary stimulus unleashed during the coronavirus pandemic.
They point to a growing number of institutional investors showing interest in Bitcoin. BlackRock on Wednesday moved to add Bitcoin futures to two of its funds, highlighting the demand for the currency.
Yet regulators and critics have warned that cryptocurrencies like Bitcoin have no fundamental factors driving their value and are highly volatile, meaning investors could “lose all their money”.
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Nonetheless, market interest has picked up sharply in recent months. Some analysts said the recent fall could be an opportunity.
“The current correction is a blessing for those who have missed the rally during which the cryptocurrency doubled from its previous high, a move from $20,000 to $40,000,” said Naeem Aslam, chief market analyst at Avatrade.
Craig Erlam, senior market analyst at currency platform Oanda, said: “We may see a small rebound now, just as we did earlier this month.
“But the price action we’ve seen this month suggests there’s some nervousness around these levels. It will certainly be an interesting watch over the coming weeks.”