FOLLOW US

Bitcoin is going through one of its hardest tests after dipping below the key $20,000 level over the weekend, according to a strategist at UBS, who said the token's ongoing slide is causing sentiment in crypto markets to sour.

James Malcolm, head of foreign exchange strategy at UBS, told Insider that the collaborative spirit that has been so prevalent in the cryptocurrency market is giving way to an "every man for himself" attitude, which is likely to sow further trouble.

Bitcoin plunged below the key $20,000 threshold over the weekend, falling as low as $17,660, according to Bloomberg prices. The world's largest cryptocurrency by market value rebounded on Sunday and was up slightly to around $20,620 as of 5.50 a.m. ET.

Digital coins have plunged in correlation with tech stocks, as investors ditch risky assets, in conjunction with the Federal Reserve hiking interest rates hard, and as the global economy slows.

The $20,000 price is a key figure to many investors because bitcoin topped that level in 2017. A drop to below levels seen five years ago represents a major blow to the thesis that bitcoin is on a solidly upwards path as more people become interested.

"We've obviously been breaking big-figure levels and that's been pretty critical. Sentiment sours the further down we go," Malcolm said.

The crash has caused major problems in the crypto market. For instance, Celsius and Three Arrows Capital are the best examples of the high levels of stress in the crypto sector. 

Celsius blocked withdrawals last week, and the Financial Times has reported that Three Arrows failed to meet demands by its lenders to stump up more cash to cover potential losses last week.

"There's this narrative out there that crypto is extremely collaborative in comparison with trad-fi," Malcolm said, referring to traditional finance. "And one of the things that's become very apparent is that it's sort of every man for himself now."

"It's difficult to think that we're outta the woods for a whole lot of reasons," Malcolm said. "The regulatory element, which is going to be the biggest hurdle for crypto, has yet to bite in any significant shape or form."