The price of bitcoin dropped Thursday as investors began shedding risk amid an equity markets decline. Fears of a slowing global economic comeback caused by the potential spread of the Covid-19 delta variant appeared to be behind investors move into safer assets like Treasurys.
Bitcoin fell below $32,500 around 4:00 a.m. EST Thursday but has been climbing slowly since then. It's currently trading at $33,000, down 4% on the day according to Coin Metrics. Most other cryptocurrency assets are falling with it, including ether, which is trading 8.7% lower at $2,150.
That backslide came around the time of reports Japan has declared a state of emergency in Tokyo for the upcoming Olympics based on a potential rebound in Covid-19 cases. Stock futures fell on the news, and companies that would benefit from an economic rebound declined in early trading. The 10-year Treasury yield also dropped to 1.25%.
Sen. Elizabeth Warren, D-Mass., warned against the growing risks the "highly opaque and volatile" cryptocurrency market poses to consumers and financial markets in a letter to Securities and Exchange Commission Chairman Gary Gensler.
Bitcoin has struggled to reclaim its May highs. Its price has been hovering in the $30,000 range, down from its all-time high of $65,000 it reached in April. Some traders see bitcoin going higher in the long-term despite some near-term headwinds. Still, some say it could fall as low at $20,000 before institutional investors get back into it.
"We're consolidating in here between [$30,000 and $35,000]. What we're seeing is Asia sells it off, and then the U.S. buys it back," Galaxy Digital CEO Mike Novogratz said Thursday on CNBC's "Squawk Box." "China has declared war on crypto as part of this broader cold war that we're getting into, and so I think we're still digesting that."
On Tuesday, China's central bank called for another shutdown of a company that "was suspected of providing software services for virtual currency transactions." For years, China has regularly issued bans on the cryptocurrency industry and operations.
While bitcoin has sometimes been referred to as a hedge, the reality is it's been quite volatile this year and tends to decrease amid broader declines in risk assets.
"There's a lot of ownership correlated with other assets, right? So if you're a hedge fund and you're getting whacked in your rate position and your equity position and your oil position, you're probably going to sell some of your crypto as well ," said Novogratz, a longtime crypto investor. "It just takes a while for it to build a more diverse investor base."
—CNBC's Kevin Stankiewicz contributed reporting