The sharp pullback in price coincided with the start of China's business day, where concerns over Evergrande's debt crisis are growing.
Bitcoin has begun a tentative recovery after a bruising trading session on Monday, followed by a sharp fall overnight.
At about 12am UTC on Tuesday — coinciding with the start of the business day in China — the world’s biggest cryptocurrency began a sharp descent from $43,287 to $40,468.
It comes amid growing concerns that Evergrande, one of China’s biggest property developers, is struggling to generate $83.5 million in interest payments that are due on Thursday.
Analysts fear this is the tip of the iceberg given how the company is $300 billion in debt, and fears of repercussions sent shockwaves through global markets — with stocks and shares tumbling alongside cryptocurrencies. On Monday, Wall Street suffered its biggest daily drop since May.
Following Tuesday morning’s dramatic sell-off, there did seem to be some improvement in Bitcoin’s charts.
It quickly rallied above $42,000 and has managed to hold above $43,000 for most of the morning — but as of 11am UTC, further advances have been proving more of a challenge.
With the Crypto Fear & Greed Index plunging to Fear, flashing a score of 27, there are concerns that this could derail Bitcoin’s bull run, at least in the short term.
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Misery Spreads to Altcoins
On a weekly timeframe, Bitcoin is faring much better than other cryptocurrencies with a smaller market cap.
Ether is down 7.9% as of 11am UTC on Monday — tumbling below $3,000 for the first time since last month — while Cardano is down 10.2%.
And Solana — one of the best performers until last week’s high-profile outage — has lost 14.6% of its value in the past seven days.
Analysts are now expecting the uncertainty facing the markets to last for several days as the Evergrande interest payments deadline draws closer.
Some have drawn parallels to Lehman Brothers, the U.S. bank that collapsed in the throes of the 2007-2008 global financial crisis. But others believe that the Chinese government will step in and offer support if necessary.