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Bitcoin slumped for a second day on Thursday, increasing digital currency losses to more than 10% in 48 hours and wiping billions of dollars from the crypto market.
The price of Bitcoin fell over 6% on Thursday to just $ 31,310 and fell below the $ 32,000 level for the first time since January 11, according to industry website CoinDesk.
The world’s most valuable digital coin has had some wild weeks, briefly hitting $ 41,940 earlier this month before plummeting sharply the following week. The reason for the latest move wasn’t immediately clear, but one digital asset manager said it could be a natural correction.
“Corrections are a natural part of any market and especially natural in the Bitcoin ecosystem,” Michael Sonnenshein, CEO of Grayscale Investments, told CNBC. “From 2016 to 2017 we recorded 6 corrections of at least 30% or more on the way to new highs.”
Ether, the second largest crypto token by market value, also fell by around 10% from where it was two days ago. According to Coin Metrics data, the coin hit an all-time high of $ 1,439 on Tuesday.
The total market value of all cryptocurrencies has lost more than $ 100 billion in the past 48 hours, falling from about $ 1.06 trillion to nearly $ 945 billion as of 8:40 a.m. ET.
Bitcoin’s recent price move comes after the new US Treasury Secretary Janet Yellen warned that cryptocurrencies are “mainly used for illicit funding”. The former Federal Reserve chairman said the government “needs to look into how we can limit their use and ensure that money laundering does not take place through this channel”.
The slump also comes despite seemingly positive news for Bitcoin, which is still up over 150% in the past three months. On Wednesday, wealth manager BlackRock, who has $ 7.8 trillion in assets under management, filed separate prospectuses for two funds that may be buying bitcoin futures contracts. This is the biggest sign yet of institutional investors flocking to the virtual currency.
Bitcoin bulls say the main reason Bitcoin has risen in recent months has been the surge in institutional demand for bitcoin. Investors like Paul Tudor Jones and Stanley Druckermiller have turned out to be Bitcoin believers as some money managers are starting to add them to their portfolios.
“Who can tell if we saw the reason for the correction, but at Grayscale we know that demand continues to rise, especially from institutional investors who have longer-term holding preferences,” said Sonnenshein.
The notable surge in the cryptocurrency was also fueled in part by the narrative that it provides a supply of gold in times of unprecedented economic stimulus that some investors fear will cause inflation to spike.
However, skeptics fear that Bitcoin is just another market bubble waiting to burst. The cryptocurrency is known for its volatility – it soared nearly $ 20,000 in late 2017 before plummeting the following year.