Illustration shows representations of cryptocurrencies
Representations of cryptocurrencies are seen in this illustration, August 10, 2022.

Cryptocurrencies fell sharply on Friday, with sudden selling dragging bitcoin to a three-week low.

Bitcoin fell as much as 7.7% to $21,404 over a few minutes during the European morning, at around 0640 GMT. It recovered slightly then continued its downward trajectory to trade around $21,400 at 1138 GMT, down 8.2% on the day.

Ether also dropped around the same time and was last down 8.8% at $1,685.

The reason for the drop was not clear.

"It's not showing the pattern of a flash crash, as the assets didn't immediately rebound sharply but sank even lower in the hours that followed," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

"It seems likely that this was as a result of a large sale transaction."

Streeter said it appeared the cryptocurrency cardano had been the first to move, followed by bitcoin and ether, and then others such as the altcoin dogecoin.

Cryptocurrencies have fallen dramatically so far this year, as Federal Reserve rate hikes and ultra-high inflation prompt investors to ditch riskier assets.

Craig Erlam, senior market analyst at Oanda, said bitcoin's failure to recover its losses "suggests there is substance to the move".

Such sharp moves are common in the highly volatile cryptocurrency market. On June 15, bitcoin plunged more than 15% as investors were spooked by the collapse of a so-called stablecoin, TerraUSD, and a major crypto lender freezing customer withdrawals.

Friday's move put bitcoin on track for its worst day since the June meltdown.

"Speculating in cryptocurrencies is extremely high risk and is not suitable for the vast majority of people," Hargreaves Lansdown's Streeter said.