Bitcoin slumps in fresh crypto sell-off

Strategy shares fell 11% after warning of a potential US$5.5 billion loss if Bitcoin doesn't rebound. Photo / Getty Images

Bitcoin slumped on Monday as nervous crypto investors drove a fresh sell-off in digital currencies.

The world’s largest cryptocurrency sank as much as 8% to drop below US$85,000 ($148,000), while the price of other digital assets including Ether also dropped.

The digital asset industry has been in turmoil since one of the biggest crypto crashes in history in early October. Around US$400b was wiped off the value of the market in a span of less than 24 hours.

Analysts said the latest fall was the result of “fading enthusiasm” among investors which was also hitting technology stocks. The tech-heavy Nasdaq opened 0.8% lower on Monday but later recovered some of its losses.

Juan Perez, of foreign exchange firm Monex USA, said: “The negativity at the moment seems tied to growing concerns about increased market concentration and questionable sustainability of overall growth in that sector, considering the issues of infrastructure as well as less co-operation in trade globally.”

Fresh warnings from China’s central banks on Saturday, which said that speculation in virtual currencies had resurfaced as it vowed to crack down on illegal activities in the sector, added further selling pressure on digital assets.

The sell-off comes amid a backdrop of rising concerns around a bubble in artificial intelligence as investors have moved away from riskier technology stocks and cryptocurrencies.

The market valuation of the entire cryptocurrency market has plummeted from nearly US$4.3t in early October to a little over US$3t today. The fall is the equivalent of wiping out the entire GDP of oil-rich Saudi Arabia.

Separately, shares in Strategy tumbled by more than 11% in early US trading after it warned it could incur a US$5.5b loss if the price of the cryptocurrency does not rebound this year.

Once a small software company, Strategy has surged in value by buying Bitcoin almost weekly, becoming the world’s biggest corporate holder of the cryptocurrency.

However, the ongoing slide in Bitcoin’s value has forced it to create a US$1.4b reserve to fund future dividend and interest payments.

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