Bitcoin fell for a second day, putting the largest cryptocurrency on pace for a fifth consecutive weekly decline, joining other risk assets under pressure with central banks taking a more aggressive tone on inflation.
Bitcoin fell as much as 4.3% to $46,501, and is down about 32% since reaching a record of almost $69,000 on Nov. 10. It has still gained about 60% this year. Ether, which is also coming off an all-time high set last month, declined for a second day.
Central banks globally are prioritizing the fight against elevated inflation by tightening monetary settings, while also keeping a wary eye on the impact of omicron. That backdrop has investors questioning whether so-called risk assets such as cryptocurrencies and technology shares are due for a rougher patch after surging from pandemic lows.
Crypto proponents have long argued that Bitcoin and other digital assets, on account of their being an idiosyncratic asset class, could act as hedges against inflation and swings in other areas of the financial market. Only 21 million Bitcoin will be put into circulation under the computer protocol that governs issuance, though that figure isn’t expected to be reached for several decades.
Academics such as Christian Catalini and Antoinette Schoer of the Massachusetts Institute of Technology who have done extensive studies of the sector say the “digital gold” argument is overblown.
“All the data to date refutes the hypothesis,” Catalini said during an interview with Bloomberg News. He cautioned that it may still be too early to make that judgment since cryptocurrencies are little more than a decade old.
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