It's a sea of red on the crypto boards today, with the Bitcoin (CRYPTO: BTC) price tumbling another 4.8% over the past 24 hours.
At time of writing in late morning trade on Friday, the world's first and biggest digital token is trading for US$87,038 (AU$134,922). That gives it a market cap of US$1.73 trillion.
Now, that's still a lofty valuation by longer-term standards. After all, only 10 years ago BTC was trading for just US$400.
But it's certainly been a painful journey for crypto investors arriving late to the party.
As you may recall, it was only on 7 October that the Bitcoin price rocketed to a new record high of US$126,198, according to data from CoinMarketCap.
Meaning crypto investors who bought at those levels will currently be nursing losses of 31%.
And with the vast majority of major cryptos joining the sell-off, we've now seen more than US$1 trillion wiped from the global digital asset sector.
Why is the Bitcoin price falling so hard?
Following the past five weeks rout, the Bitcoin price is now down 8.0% since this time last year. That sees the token significantly underperforming the 1.5% gains delivered by the S&P/ASX 200 Index (ASX: XJO).
Not to mention the 84.9% one-year gains posted by the S&P/ASX All Ordinaries Gold Index (ASX: XGD). An unwelcome reminder, perhaps, to those who've lauded the token as 'digital gold'.
The latest pressure on the Bitcoin price comes on several fronts.
First, investors are significantly paring back expectations of another interest rate cut from the US Fed this year. And Bitcoin has proven to be highly sensitive to interest rates.
Second, the token remains a risk asset. And with the Nasdaq Composite Index (NASDAQ: .IXIC) coming under pressure amid growing fears of a pending AI bubble burst, a lot of crypto investors look to be lightening their Bitcoin exposure, along with sending AI chip maker Nvidia Corporation (NASDAQ: NVDA) shares down 3.2% overnight.
Commenting on the US$1 trillion crypto collapse, said James Butterfill, head of research at CoinShares, said (quoted by Bloomberg), "Investors are stabbing in the dark a bit — they haven't got any direction on macro, so all they can see is what on-chain whales are doing and they're getting quite worried about it."
Matthew Hougan, chief investment officer at Bitwise Asset Management, added:
I think we are closer to the end of the selling than the beginning, but markets are uncomfortable and crypto could have more downside here before it finds a base to recover from.
What about Ethereum?
As mentioned, the Bitcoin price is far from the only one getting hammered lately.
Ethereum (CRYPTO: ETH), the world second biggest crypto, is down 6.3% over 24 hours, currently trading for US$2,847.
The Ethereum price is now down 42.5% since the token notched its own record high of US$4,954 on 25 August.
