Bitcoin Tumbles 20% from Record High due to New COVID Variant

Bitcoin plunged 20% from its record-high earlier this month, as the new coronavirus variant outbreak prompted traders to dump risk assets around the world, according to Bloomberg.

The world's largest cryptocurrency was down 9% to $53,619 in Friday's trading, and Ethereum, the second-largest digital currency, was down 13%, while the broader Bloomberg Galaxy cryptocurrency index was down 4%.

The identification of a new mutated strain of the coronavirus in South Africa prompted liquidations across markets, with European shares falling the most since July, while emerging markets fell.

Bitcoin itself has been under pressure since hitting a record high of around $69,000 earlier this month on enthusiasm over the first US ETF linked to futures contracts on digital assets. The coin is currently sitting near the 100-day moving average of $53,940, which acted as support during the pullback in late September.

“It is ironic that the crypto markets yesterday afternoon began to look very bullish with the hopes of the Santa Claus rally,” Jonathan Cheesman, head of over-the-counter and institutional sales at FTX, said in the note Friday. "It's going to be a nervous weekend for sure."

The analysts cited a number of crypto hurdles including US tax reporting requirements for cryptocurrencies and the intensification of China. Now, the prospect of a new virus pressure risks undermining the liquidity and risk appetite of the speculative sector.

Bulls remain committed to the view that more institutions and retail investors will embrace virtual currencies.

“This is a market reaction/correction in an uptrend,” said Vijay Ayyar, head of Asia Pacific at Luno, who noted that options days are over - like Friday - can often be volatile. He said that somewhat of a drop of $48,000 to $50,000 might be more related, and that "a normal 20% pullback in the direction of bitcoin leasing as we've seen many times before."

Last March, the Central Bank of Egypt warned against dealing in, trading in, promoting or carrying out activities related to cryptocurrencies within the Egyptian market.