Bitcoin sinks below $34,000 as sell-off cuts into early-January momentum

• Bitcoin sank as low as $33,412.72 on Wednesday as investors continued to take profits from the cryptocurrency's massive rally.
• The token reached a record of nearly $42,000 earlier this month before momentum stalled.
• Analysts see $34,000 as a key support level for the token, while a move above $40,000 could revive bitcoin's rally.
• Watch bitcoin trade live here.

Bitcoin tumbled below the key $34,000 level on Wednesday as selling continued to drag the largest cryptocurrency below key support levels.

The token slid as low as $33,412.72 before paring some losses. Bitcoin traded at $34,295.70 as of 11:45 a.m. ET Wednesday, down roughly 7.8% from 24 hours ago. The cryptocurrency has fluctuated around the $35,000 level in recent trading days as momentum from its recent rally stalls.

Bitcoin climbed to a record of nearly $42,000 earlier this month as institutional and retail investors alike piled into the cryptocurrency market. The token's rapid ascent quickly gave way to profit-taking and prices have since struggled to rise back above $40,000. Still, the cryptocurrency sits about 16% higher year-to-date.

Strategists have regarded the $40,000 level as critical to bitcoin's next rally. JPMorgan strategist Nikolaos Panigirtzoglou said in a Friday note that investors will likely continue to exit their bitcoin positions unless the token retakes the support level. Flows into the Grayscale Bitcoin Trust and futures contracts can serve as early indicators of whether such support can be reached, he added.

Read more: Michael Saylor has invested over $1 billion of MicroStrategy's funds in Bitcoin. The software CEO-turned Bitcoin whale explains why he is making such a massive bet on the digital asset.

Looking lower, analysts view $34,000 as the next floor for bitcoin prices. While the token held that level Wednesday morning, continued losses could accelerate outflows.

"A break of this may be a cause for concern in the near-term, with $33,000 then looking quite vulnerable," Craig Erlam, senior market analyst at Oanda Europe, said, adding $30,000 is "the only level that really matters."

The sell-offs come as more financial-sector leaders warn of irrational exuberance in the cryptocurrency market. Billionaire investor Mark Cuban recently likened bitcoin's rally to "the internet stock bubble" of the late 1990s.

Janet Yellen, President Joe Biden's nominee for Treasury Secretary, said Tuesday that legislators should "curtail" cryptocurrency use on concerns the tokens are funding illicit activities.

Elsewhere in the crypto market, Ethereum sank 8% after surging to a record high on Tuesday. While bitcoin has seen the most trading activity in recent months, its growing popularity has lifted other popular cryptocurrencies.

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