Bitcoin posted its worst two-day drop since March, sliding as much as 21% over Sunday and Monday as investors moved to perceived safe-haven assets - in this case not the world's largest digital currency.
Bitcoin hit a record high of nearly $42,000 on Friday on continued interest in the digital currency as a hedge against inflation and an alternative to the falling dollar. The price of bitcoin has more than quadrupled in the past 12 months.
However, stock futures fell on Monday as investors recalibrated their strategies amid expectations that proceedings to impeach current President Donald Trump will move forward, and as a surge in coronavirus infections continued to pummel the U.S.
That, combined with Friday's weaker-than-expected U.S. nonfarm payrolls report also prompted investors to move to cash, pushing the value of the U.S. dollar higher on expectations that the U.S. economy remains weak and that inflation will stay tame.
That, in turn, prompted crypto investors to move out of bitcoin. At last check, bitcoin traded at $34,707, down 13.32%.
U.S. Treasury yields also rose on Monday, with the 10-year Treasury rising above 1% for the first time since March.
A report from the U.K.’s Financial Conduct Authority on Monday also pressured bitcoin after the regulator warned investments and lending products related to crypto come with “very high risks.”
“The FCA is aware that some firms are offering investments in cryptoassets, or lending or investments linked to cryptoassets, that promise high returns,” the financial services regulator said, adding that consumers "should be prepared to lose all their money.”
Despite bitcoin's drop on Monday, crypto watchers and others expect a weak dollar, turbulence across traditional financial markets and a greater shift in business and commerce online will help fuel further gains.
In a research note to clients, analysts at J.P. Morgan last week set a long-term bitcoin price target of more than $146,000 based on the assumption that the cryptocurrency will grow in popularity as an alternative to gold -- and as the cryptocurrency moves to more mainstream use.
Optimism that the Securities and Exchange Commission under new leadership could approve a bitcoin exchange-traded fund this year has also fueled additional interest in bitcoin, as has PayPal (PYPL) - Get PayPal Holdings Inc. Report allowing its users to buy and sell bitcoin across its platform.