Bitcoin's recovery lost steam on Friday as it erased early gains and dipped 3 percent to below $40,000. At 1:40 am IST, the cryptocurrency was trading at $39,532 nearly 3 percent down form the day's high.
While the level is roughly 30 percent above from its Wednesday low, and just below its 200-day moving average, but its recovery from the massive plunge shows signs of flaltering.
Ether -- an altcoin based on ethereum -- also came under pressure on Friday, falling nearly 2 percent to $2,714.
The offloading in the crypto world has coincided with a surge in gold, which has hit 4-1/2 month highs and is on track for three straight weeks of gains, rising 1.8 percent so far this week.
Click here to understand the reasons behind the bitcoin collapse.
A narrative of bitcoin becoming "digital gold" had gained traction earlier this year, with JPMorgan saying in January that bitcoin emerged as a rival to gold.
But Societe Generale questioned the comparison on Thursday: "Bitcoin has clearly 'outshone' gold both to the upside and now also to the downside. But with such a gap in volatility and amplitude, does it make sense to compare the two assets at all?"
Ether is down 24 percent for the week and bitcoin down 15 percent. The selloff also spilled over into equity markets on Wednesday, more so in companies with high exposure to cryptocurrencies, such as Coinbase. Coinbase is down 10 percent this week.
"For assets like crypto and equities the underlying common denominator is very loose central bank policies around the world and that combined with an exuberance for risk taking has filtered into crypto markets," said Edward J. Perkin, chief equity investment officer at Eaton Vance.
With inputs from Reuters