Bitcoin plunges to below $40,000 for first time since August

The declines followed a volatile session on Wall Street that saw stocks swing from early gains to a selloff

Bitcoin prices were trading at levels not seen since August, pushing below a key support level on Friday, as a selloff of perceived riskier assets spread to cryptocurrencies.

Bitcoin, the world largest crypto by market cap, slid more than 7% to $39,010, which took it below the key $40,000 level in a slide that began late Thursday. Ether, which runs on the ethereum blockchain, fell 8% to about $2,878, and XRP, Bitcoin Cash, Litecoin and Monero all posted sharp losses, according to Kraken data.

The declines followed a volatile session on Wall Street that saw stocks swing from early gains to a selloff, repeating Wednesday’s action and notably for the Nasdaq Composite, which pushed deeper into correction territory.

The pessimism continues to grow among investors and traders when it comes to riskier assets and this is chiefly influencing the price of equities and bitcoin, said Naeem Aslam, chief market analyst at AvaTrade, in a note to clients.

The thing with bitcoin is that when it begins to fall, the price action drops like there is no tomorrow, said Aslam, who added that January also tends to be a volatile month for the cryptocurrency on a historical basis.

He blamed the slide on several factors, among them a growing loss of status as a hedge against inflation for bitcoin and other crypto, with the Federal Reserve and other global central banks expected to begin bringing inflation under control with tighter policy.

Aslam also cited a proposal from Russia’s central bank on Thursday to ban the use and mining of cryptocurrencies. Russia is one of the world’s leading bitcoin mining locations, and joins China, which imposed its own ban on activity last year.

Oanda senior market analyst Edward Moya had predicted earlier Thursday that bitcoin could fall below $40,000 due to the Russian proposal.

The adoption mechanism also remains slow, said Aslam.