Bitcoin drops 8% as $126 billion is wiped off the cryptocurrency market

Bitcoin cratered on Thursday as a major stock sell-off in the U.S. spooked the cryptocurrency market.

Bitcoin was down more than 8% at $36,251.50 on Friday around 4:03 a.m. ET, according to CoinDesk data. On Thursday, bitcoin dipped below $36,000 before paring some of those losses.

Other cryptocurrencies including ether and XRP were also down sharply.

Around $129 billion of value was wiped off the cryptocurrency market in a 24-hour period as of 4:03 a.m. ET, according to data from CoinMarketCap.

The selling of cryptocurrency was sparked by a painful day on Wall Street where the Dow Jones Industrial Average lost more than 1,000 points on Thursday, marking its worst single-day drop since 2020.

The tech-heavy Nasdaq fell nearly 5%. Bitcoin has remained correlated to equity markets with the cryptocurrency falling or rising in tandem with stocks.

“Overall, global markets have been spooked by growth fears as we can see. The Dow had its worst drop since 2020, and all related risky-based assets followed suit including crypto,” Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, told CNBC.

On Wednesday, the U.S. Federal Reserve raised its benchmark interest rate by half a percentage point. Further interest rate hikes and tightening of monetary policy have sparked fears that the U.S. economy could go into a recession.

Ayyar said that bitcoin “lost a key level” when it fell below $37,500 and that could indicate “a move much lower” in the next few days. He said bitcoin could test a low of $30,000 soon and if the price falls below that, it could drop to $25,000.

“However, we could see some relief rallies in the meanwhile, but nothing to indicate a change in sentiment” unless bitcoin is able to find market support above $42,000, Ayyar added.