Bitcoin Price Slumps Below $85K. A Few Reasons Cryptos Are Down Big.

Bitcoin is down more than 30% from its record high. (Michael M. Santiago/Getty Images)

The price of Bitcoin slumped below $85,000 early Friday as the cryptocurrency selloff deepened.

Investors had been hoping for gains after Nvidia’s solid earnings and strong forecast sparked a brief rally in tech stocks, which tend to move in tandem with cryptocurrencies. The Nasdaq Composite was up more than 2% early Thursday before falling into negative territory. It had fallen 1% by 1 p.m. Eastern time and closed down 2.2%.

Bitcoin continued to fall overnight, trading at $83,782 early Friday, down 9% over the past 24 hours. The world’s largest cryptocurrency is now is off more than 33% from its record high of $126,272.76 on Oct. 6.

But even as the market was rising early Thursday, Bitcoin was falling. It’s “possible that Bitcoin’s early morning slump contributed to the market’s reversal later in the day,” Interactive Brokers’ chief strategist Steve Sosnick wrote Thursday afternoon. “It’s become such a proxy for speculation that I can’t be the only person using it as a signal.”

It isn’t entirely surprising that the digital asset didn’t get a boost from Nvidia, given that the coin is in a technical correction, defined as a fall of 20% or more from a recent high. That could make investors wary about jumping back in.

Created with Highcharts 9.0.1Sources: CoinDesk (BTCUSD, SOLUSD); Kraken​(ETHUSD, XRPUSD)

Created with Highcharts 9.0.1SolanaBitcoinEthereumXRPNov. 17Nov. 20-10.0-7.5-5.0-2.502.55.07.5%

“A significant number of investors are dipping into the negative,” Stéphane Ouellette, CEO of FRNT Financial, a Toronto-based digital asset investment bank, told Barron’s. Since many bought Bitcoin around $90,000, they may be extra cautious about buying more when they’re underwater on their holdings.

They may also have been forced to sell to cover margin calls. That is when brokers demand more cash from investors who have borrowed money to make investments.

Thursday’s earlier disconnect between Bitcoin and the broader market’s movement is partly due to how crypto is traded. “Markets are volatile right now. Because this asset trades 24/7, it’s losing its daily correlation with equity markets due to the short-term volatility,” Ouellette said.

Other cryptos were hurting too on Friday, with Ethereum down 10% and XRP falling 9%.

Write to Anita Hamilton at anita.hamilton@barrons.com and George Glover at george.glover@dowjones.com