Bitcoin traders appear to be heeding a warning of a demand slowdown ahead of China’s lunar New Year.
The largest cryptocurrency slumped as much as 4 per cent to $8,281, while altcoins such as Ethereum Classic tumbled more than 11 per cent to $8.18 in New York trading.
Arthur Hayes, co-founder and chief executive officer of BitMex, a cryptocurrency exchange, predicted in a post on Twitter late Wednesday that it’s time for “volatility and volumes to nose dive.”
Cryptocurrencies have been under pressure this week. The price of Bitcoin has dropped more than 6 per cent since Friday, while the Bloomberg Galaxy Crypto Index -- which tracks some of the major digital currencies -- has slumped about 5.7 per cent.
“Bitcoin and the entire crypto space are under pressure as uncertainty over regulatory scrutiny is expected to intensify and investor skepticism grows for the short-term outlook for risky assets,” said Ed Moya, a market analyst with OANDA. Investors “saw central banks unite and begin a review on digital currencies, fading optimism that a Bitcoin ETF will occur, and amid the China coronavirus worries, a flight-to-safety to the bond markets and not cryptocurrencies.”
Twenty of the top 50 crypto exchanges are based in the Asia-Pacific region and accounted for about 40 per cent of Bitcoin transactions in the first half of last year, according to data from Chainalysis. Within the region, the most exchanges are in China, the research firm found.
A number of technical indicators are flashing sell signals. Earlier this week, for instance, a measure of upward and downward movements of successive closing prices flashed a sell signal, the first such sign since Bitcoin’s peak in June of last year. Should Bitcoin’s price drop further, the GTI Vera Convergence-Divergence indicator could also generate such a signal.
