BITCOIN has plummeted close to the dreaded "death cross" phase amid fears of a mass sell-off.

       It has been tumbling since the US Federal Reserve withdrew massive liquidity, which has been pumped into markets since the onset of the coronavirus pandemic.

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       Fears are also growing that the Fed could further cut back support for the US economy, which is bad news for riskier assets like crypto.

       Today the Bitcoin price dipped briefly below $40,000 for the first time since September.

       At the time of writing, Coindesk shows the price of bitcoin slumped, the largest cryptocurrency by market cap was changing hands at $40,834, based on CoinDesk pricing, down 12 per cent so far in 2022 —one of Bitcoin’s worst-ever starts to a year.

       Naeem Aslam, chief market analyst at Avatrade, said: "The main culprit behind the slump in crypto prices is the Fed's decision to withdraw massive liquidity, which has been pumped into markets since the onset of the coronavirus pandemic."

       Research by Kraken suggests many of Bitcoin’s previous death crosses, including those seen in 2014 and 2018, coincided with “either a sell-off in the days that followed or a continued macro downtrend that confirmed a bear market”.

       But this does not always happen.

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       For example last time it happened on June 21 after China continued its tough crackdown on mining and trading the cryptocurrency.

       That time it was resolved in a fresh bull run.

       After the December crash Bitcoin was trading around $50,000.

       The value of Bitcoin has wildly fluctuated since its launch in 2009.

       5 risks of crypto investments

       THE Financial Conduct Authority (FCA) has warned people about the risks of investing in cryptocurrencies.

       Consumer protection: Some investments advertising high returns based on cryptoassets may not be subject to regulation beyond anti-money laundering requirements. Price volatility: Significant price volatility in cryptoassets, combined with the inherent difficulties of valuing cryptoassets reliably, places consumers at a high risk of losses. Product complexity: The complexity of some products and services relating to cryptoassets can make it hard for consumers to understand the risks. There is no guarantee that cryptoassets can be converted back into cash. Converting a cryptoasset back to cash depends on demand and supply existing in the market. Charges and fees: Consumers should consider the impact of fees and charges on their investment which may be more than those for regulated investment products. Marketing materials: Firms may overstate the returns of products or understate the risks involved.

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       Bitcoin is down after a Federal Reserve announcement Credit: Virgin

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