Bitcoin on track for biggest weekly fall since September as Janet Yellen and 'double spend' report spook speculators
- The price of bitcoin was on track for biggest weekly fall since September on Saturday.
- Comments from Janet Yellen and a debunked report of a 'double spend' knocked market confidence.
- Bitcoin recovered from a sharp fall to stand at $32,170 on Saturday morning.
The bitcoin price was set for its biggest one-week fall since September on Saturday morning, having slipped around 10% since Monday.
Bitcoin - which hit an all-time high of close to $42,000 on January 8 - tumbled to around $28,000 on Thursday evening.
But it recovered to around $32,170 by Saturday morning. That means it was down about 10% since Monday, putting it on course for the the biggest weekly drop since declining by 12% in September, according to TradingView data.
Should the price tumble back towards the lows seen in the Asia session, the bitcoin price could be heading for its worst week since it crashed 33% in March 2020.
Bitcoin came under selling pressure this week after Janet Yellen, Joe Biden's pick for Treasury secretary, suggested the use of cryptocurrencies should be "curtailed" because they were used mainly for "illicit financing".
Many analysts put bitcoin's overnight slide on Thursday down to a report by BitMEX Research that suggested a flaw called "double spend" - when someone is able to spend the same coin twice - had occurred in the cryptocurrency's blockchain.
Yet the report was widely rejected in the cryptocurrency community. Analysts said that what BitMEX initially thought could be a "double spend" was in fact a regular occurrence in the blockchain system that underlies Bitcoin.
Cryptocurrency expert Andreas Antonopoulos said on Twitter: "There was a chain re-organization in the Bitcoin blockchain. This is a common occurrence that is part of Bitcoin's normal operation."
He added: "All of this is normal. A 1-block reorganization happens every couple of weeks."
Bitcoin has soared in recent months, rising from a 2020 low of less than $4,000 in March to more than $41,000 earlier this month. Overall, it is up around 280% in the last year.
Fellow cryptocurrency Ethereum was around 1% higher on Saturday morning to $1,256. That was shy of an all-time high of more than $1,430 hit last week.
Advocates say cryptocurrencies are fast becoming safe-haven assets that can protect investors' portfolios against the risk of inflation and currency devaluation triggered by the unprecedented fiscal and monetary stimulus unleashed during the coronavirus pandemic.
They point to a growing number of institutional investors showing interest in Bitcoin. BlackRock on Wednesday moved to add Bitcoin futures to two of its funds, highlighting the demand for the currency.
Yet regulators and critics have warned that cryptocurrencies like Bitcoin have no fundamental factors driving their value and are highly volatile, meaning investors could "lose all their money".
Nonetheless, market interest has picked up sharply in recent months. Some analysts said the recent fall could be an opportunity.
"The current correction is a blessing for those who have missed the rally during which the cryptocurrency doubled from its previous high, a move from $20,000 to $40,000," said Naeem Aslam, chief market analyst at Avatrade.
Craig Erlam, senior market analyst at currency platform Oanda, said: "We may see a small rebound now, just as we did earlier this month.
"But the price action we've seen this month suggests there's some nervousness around these levels. It will certainly be an interesting watch over the coming weeks."
This article was updated to highlight that the report that suggested a "double spend" occurred was widely rejected in the Bitcoin community.