Bitcoin fell 4.4 percent Friday, slipping below $9,000 for the first time in two weeks.
Analysts cited a lack of positive market drivers and speculation that the U.S. Federal Reserve might pause this year's rate-cutting cycle, which could curb demand for the cryptocurrency as a potential inflation hedge.
The price dropped to $8,800 as of 18:57 UTC (1:57 p.m. New York time), according to Trading View. It's still more than double where bitcoin was at the start of the year, leaving the cryptocurrency as one of the world's best-performing asset classes in 2019.
Bitcoin had rallied more $2,000 in late October after Chinese President Xi Jinping declared that the country would embrace blockchain - the decentralized computing networks underpinning cryptocurrencies - as a "core" technology, followed by the reveal of hundreds of blockchain projects already in motion. Since then, though, the price had mostly fluctuated within a range between $9,100 and $9,600.
Friday's decline accelerated after bitcoin broke below its 200-day moving average of $9,186, which had been seen as a price support by some traders using technical analysis.
"This is a pretty classic example of a technical move," said Kevin Kelly, co-founder at Delphi Digital, a cryptocurrency research firm in New York. "It just sort of broke to the downside."
The price drop appears to have triggered margin calls for some traders, leading to position liquidations and creating additional selling pressure, Kelly said.
One of the macroeconomic narratives for buying bitcoin is that, like gold, it can be used as an inflation hedge, Kelly said. But with increasing signs that the economy might be responding to the Fed's three interest-rate cuts earlier this year, speculation is mounting that the U.S. central bank might refrain in the near term from further moves to ease monetary policy, he said.
"You have seen an unwind of the consensus on this doomsday narrative," Kelly said.
Some investors may also have become more skeptical that China's public push to use blockchain would translate into new demand for bitcoin, according to Greg Cipolaro, co-founder of Digital Asset Research.
While many traders thought bitcoin, as the original blockchain and biggest digital asset by market value, might benefit from broader adoption of the technology, if China has been at work developing a digital version of its own currency, it could be a win for blockchain technology on the whole but mean little for bitcoin today.
"My opinion is that that wasn't the right read of that news," Cipolaro said. "They were clearly saying blockchain not bitcoin."
With that realization in the backdrop, "you really haven't seen follow-through on the price," he said. "There hasn't been a major catalyst post that $2,000 rip two weeks ago."
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