Many investors have viewed bitcoin as a way to protect themselves from interest rate cuts by central banks like the Federal Reserve, ECB and Bank of Japan.
When banks are slashing rates, like they are now, that tends to weaken the value of the paper currencies that governments print.
“Bitcoin has always been touted as digital gold and considered as a safe haven asset. A safe haven asset is usually popular amid investors during…turbulence…but lately, we have not seen this at all,” said AvaTrade chief market analyst Naeem Aslam in a report Friday morning.
Aslam said that the fact that bitcoin had been surging up until just a few weeks ago is the main reason it is getting hit so hard now.
He noted that many investors in stocks are dumping assets that had been doing well to lock in gains and pay back loans they used to buy stocks.
Investors may need to take further profits in bitcoin to avoid a margin call from brokerages that would force them to sell even more assets, Aslam said. He thinks bitcoin could fall back to about $2,630, which is where it traded in August 2016.