The digital token lost 50% from its November 2021 high
Bitcoin fell to a new six-month low on Monday, pushing the token 50% below its November peak and crashing cryptocurrency market-related stocks.
During the European session, the digital coin plunged 9% to $33307, the lowest since mid-July. While bitcoin remains the world's largest cryptocurrency by market capitalization, it has lost more than half of its value from its peak of just under $69,000 last year.
The overall market for digital assets has also come under heavy pressure from sellers, with the FT Wilshire Index, which tracks the top five digital coins excluding bitcoin, down 27% in 2022.
The sharp decline in cryptocurrency markets has spilled over into the U.S. stock market. A basket of crypto stocks compiled by Goldman Sachs has lost about a third of its value in 2022. U.S.-listed crypto exchange Coinbase plunged 13 percent on Monday, while MicroStrategy, a software developer that actively invests in bitcoin, took a similar drop.
"It looks like a collapse so far," Michael Avery, global strategist at Rabobank, noted in a note Monday.
The sell-off coincided with a massive investor pullback in speculative assets as they prepare for global central banks to begin limiting stimulus programs. Expectations of higher interest rates are making risky investments less attractive because it will increase the returns investors can get from high-quality securities such as U.S. government bonds.
"It's very much like a condition in which you have to sell for at least another month ... all speculative and HYIP-related assets and buy stocks of companies that are benefiting from a rate hike," said Tancredo Cordero, founder of Kuros Associates.
Short selling involves betting against a company's stock, while long positions are the opposite.
The central bank is tightening the screws.
"The funny thing," said Joel Krueger, market strategist for the LMAX group, "is that cryptocurrencies and bitcoin are assets that came out of a rejection of the existing system, but nevertheless they have benefited enormously from that system and the monetary incentives that have led to an unprecedented influx into risky assets.
The appeal of cryptocurrencies has also suffered because of actions by regulators around the world to tighten trading and advertising rules for digital assets.
Last week, Russia's Central Bank proposed banning all cryptocurrency transactions in the country, saying that, as with other "pyramid schemes," the growth of digital coins is "supported by demand from new entrants."
Last Wednesday, the U.K.'s Financial Conduct Authority announced its intention to restrict misleading cryptocurrency advertising after increasing consumer protections in Spain, Singapore and Italy.
Shares of MicroStrategy, which is led by famed crypto bull Michael Saylor, fell more than 17 percent Friday after the U.S. Securities and Exchange Commission opposed the company's exclusion of bitcoin rate fluctuations from its adjusted accounting numbers.