Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) are both tumbling.
Bitcoin is down 6% over the past 24 hours, currently trading for US$47,120 (AU$66,360).
Ethereum, the world's number 2 crypto with a market cap of $US454 billion, is down 7% since this time yesterday. One Ether is currently worth US$3,822.
The Bitcoin price is still up 60% in 2021. But it's now down 31% from its record high of US$68,789, set on 10 November.
Ethereum also reached its record high on 10 November, peaking at US$4,859. That puts Ether down 21% from its all-time highs, though the token remains up an impressive 419% year-to-date.
Why are Bitcoin and Ethereum deep in the red?
Bitcoin, Ethereum and almost every crypto are in the red today, according to data from CoinMarketCap.
With altcoins often following the direction of Bitcoin, we'll keep our focus there.
So what headwinds is the world's first and biggest digital token battling?
Recent months have shown that Bitcoin is behaving more like a risk asset than a safe haven in times of market uncertainty. When global share markets fall, Bitcoin tends to lose value.
With the Omicron COVID variant spreading rapidly, and investor concerns over structural inflation growing, investors have been re-evaluating their riskier holdings.
Yesterday (overnight Aussie time) we saw US markets selloff sharply. The tech-heavy Nasdaq closed down 1.4%. At the time of writing, the S&P/ASX 200 Index (ASX: XJO) is down a more muted 0.2%.
What else should crypto investors be watching?
With Bitcoin now having retraced for 5 weeks running since hitting its record high, it's fallen right about level with its 200-day moving average. That's a key price level which crypto analysts keep an eye on. Any significant fall below the 200-day moving average is seen as bearish for the nearer-term price outlook.
Addressing Bitcoin's continuing volatility and the perception by some crypto investors that it can serve as an inflation hedge, Marc Chandler, chief market strategist at Bannockburn Global Forex said (quoted by Bloomberg), "The idea that as it matured, the volatility would ease has not really materialised. The volatility is deadly and its other supposed attributes, like a hedge against inflation, seems spurious."
