By Vildana Hajric and Isabelle Lee
Bitcoin extended its downturn, putting the coin on pace for a consecutive weekly decline as it gives back some of its 2023 gains.
The largest digital asset fell as much as 3.2% on Friday to around $26,100, and is staring down its first back-to-back weekly losses since March, according to data compiled by Bloomberg. Second-ranked Ether and a gauge of the top 100 tokens also declined on Friday.
Bitcoin, which pushed past $30,000 last month but was unable to hold that key level, has slipped about 10% so far in May.
“Bitcoin’s inability to successfully negotiate the 30k level over the last few weeks has frustrated traders who were hoping for a breakout,” said Frank Cappelleri, founder of CappThesis. “With the latest failure, it seems that buyers have grown impatient, opting to manage risk rather than deploying fresh capital.”
So-called meme tokens — highly volatile coins that tend to go berserk during periods of heightened bullishness — have also given up recent gains, with daily trading volume dropping 50% to about $500 million from more than $1 billion, according to data from Kaiko.
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A drop in liquidity, congestion on the Bitcoin blockchain and a US regulatory crackdown have sapped sentiment in the crypto sector.
“In part due to the extreme meme-coin phenomena lately, the major blockchains have become rather congested,” said Mati Greenspan, chief executive officer of Quantum Economics. “Transaction fees and confirmation times have gone up and most of the regular everyday users will probably prefer to wait until the network clears out before commencing their usual activities.”
Bitcoin’s once-strong correlation with stocks has all but disappeared, a possible sign of the diminished influence of macroeconomic drivers on digital assets compared with the rest of global markets.
“The recent bout of selling is to do with traditional finance institutions trying to offload their digital assets led by the regulatory crackdowns on crypto and the need to manage their balance sheets,” said Robert Alcorn, chief executive officer of Clearpool, a decentralized finance lending protocol.
Earlier this week it emerged that top market-making firms Jane Street Group and Jump Crypto are pulling back from trading digital assets in the US, while Jane Street is also scaling back its crypto ambitions globally.
Volumes have “fallen materially on exchanges and news this week of two large market makers exiting a number of exchanges has impacted sentiment,” said Richard Galvin, co-founder at fund manager Digital Asset Capital Management.
Recent market swings have been driven largely by “spot selling, with derivatives data still not showing extremity of sentiment or positioning,” he added.
Analysts are now scouring for the next levels of support for Bitcoin. Markus Thielen, head of research at Matrixport, said he’d be “cautious and short until Bitcoin prices drop back to $24,600.”