Bitcoin Price Falls. There’s a New Threat to the Crypto Rally.

The S&P Dow Jones Indices on Tuesday announced the launch of the S&P Digital Markets 50—a new index designed to meet growing investor demand for broad exposure to digital assets. (ROMAIN COSTASECA/Hans Lucas/AFP via Getty Images)

Key Points

• Bitcoin is down 1.4% over 24 hours to $122,494, reducing seven-day gains to 3.3% after hitting a record high.
• Smaller cryptocurrencies like Ether, XRP, and Solana fell, while Binance Coin rose 2.4% with a 50% 30-day gain.
• The S&P Dow Jones Indices launched the S&P Digital Markets 50, a new index for digital assets.

Cryptocurrencies are selling off just days after reaching fresh highs.

Bitcoin was down 1.4% over the past 24 hours to $122.494, according to CoinDesk data, bringing seven-day gains down to 3.3%. The world’s largest crypto has risen 9.3% over the past 30 days.

Among smaller cryptocurrencies, Ether fell 4.3%, XRP dropped 3.6% and Solana slid 4%. Binance Coin was the outlier, up 2.4% early Wednesday, boasting a 50% gain over the past 30 days.

Earlier this week, Bitcoin hit a record high just north of $126,000, boosted by the so-called debasement trade, that is, the piling into assets seen as a hedge against a weaker dollar. Apart from cryptos, the debasement trade also propelled gold to a record high of more than $4,000 this week, effectively doubling over the past two years. Gold futures traded at $4,057 an ounce early Wednesday.

Bitcoin, however, has pared some gains since the start of the week and is now trading some 3% below its all-time high. One reason could be the recent strengthening of the dollar.

The dollar climbed 0.3% against a weighted basket of other currencies to levels not seen since early August. “If this [dollar increase] becomes a trend, a deeper decline is inevitable,” said FxPro analyst Alex Kuptsikevich. The dollar index remains down nearly 9% since the start of the year.

“Pullbacks have become a frequent occurrence in the crypto market—an important consequence of the growing number of professional cryptocurrency traders who take profits on the way up,” added Kuptsikevich, also noting that retail investors are returning to the crypto market as Bitcoin keeps hitting new highs.

On Tuesday, the S&P Dow Jones Indices, the group behind the S&P 500 and the Dow Jones Industrial Average, announced the S&P Digital Markets 50—a new index designed to meet growing investor demand for broad exposure to digital assets. The index will track 15 cryptocurrencies and 35 blockchain-linked stocks.

Write to Elsa Ohlen at elsa.ohlen@barrons.com