Bitcoin prices retreated below $100,000 for the first time since June on Tuesday. The pioneering cryptocurrency has struggled since a "flash crash" rocked the crypto space last month.
The largest cryptocurrency (BTCUSD) briefly traded as low as $99,982 in afternoon trading before recouping some losses and bouncing back to $101,269, according to FactSet data.
As of 4 p.m. Eastern time, bitcoin was trading at $100,689.51, a drop of 5.6% on the day. That marked the worst session for the crypto since April 3, Dow Jones Market Data showed, and capped off bitcoin's worst three-day stretch since Oct. 11, when it fell 9.9%. The weakness spread to exchange-traded funds that hold bitcoin, with the iShares Bitcoin Trust ETF IBIT falling 5.5%, its biggest drop since April 7.
Its latest pullback brought bitcoin to the cusp of bear-market territory, down more than 19% from its Oct. 6 end-of-day high.
Steve Sosnick, chief strategist at Interactive Brokers, pointed out that bitcoin has been under pressure since the Oct. 10 "flash crash" that rattled the broader crypto space and spurred the biggest liquidation in the history of the asset class.
"Stocks had a bad day that Friday and since recovered, but crypto never did," he said.
More recently, the selloff in cryptocurrencies like bitcoin has coincided with a loss in altitude for other popular momentum trades. Gold (GC00), small-cap stocks and quantum-computing stocks like Rigetti Computing Inc. (RGTI) were also coming under pressure on Tuesday.
"People are in the gold trade, people are in the uranium trade, people are in the quantum-computing trade, people are in the small-cap trade," said Ram Ahluwalia, chief investment officer at Lumida Wealth. "They're all rising and falling together."
But the roots of the latest crypto selloff can be traced back to the October Federal Reserve meeting, he said. The central bank announced an interest-rate cut on Oct. 29, its second this year. However, during the press conference that followed, Fed Chair Jerome Powell expressed some uncertainty about another reduction in December. This has been bad news for bitcoin, Ahluwalia explained, since lower rates typically help juice speculative assets like cryptocurrencies.
Katie Stockton, founder and managing partner at Fairlead Strategies, pointed out earlier this week that bitcoin had broken below its 200-day moving average, suggesting that there could be more downside ahead in the near term. Her technical analysis suggested that the next reliable support level for bitcoin would be around $94,200.
Ahluwalia noted that while bitcoin is technically on the cusp of a bear market, veteran crypto investors have endured much larger drawdowns over the years. "For people who are seasoned in this asset class, this isn't a big deal," he said. "I think this is just a shakeout."