Bitcoin’s volatile week rattles faith in crypto resurgence

Prices for the digital asset tumbled about 12% this week, marking the steepest decline since September.
Image: Andrey Rudakov/Bloomberg

The sharp selloff in Bitcoin this week is stoking fresh questions about the sustainability of the cryptocurrency boom.

Prices for the digital asset have tumbled about 12% this week, marking the steepest decline since September. Bitcoin was higher on Friday, pushed back above $32,000 after a series of wild swings the past two days. Commentators have cautioned that a sustained drop below $30,000 could presage further losses.

“Being Bitcoin, a 10% range intraday is a mere flesh wound to the digital asset, in a world where tradable versus investible is seriously blurred,” said Jeffrey Halley, senior market analyst at Oanda Asia Pacific Pte. The digital coin could “easily be $35,000 again tomorrow or could drop through $30,000 and test notional support at $27,000.”

Bitcoin’s surge to a record of almost $42,000 on Jan. 8 embodied the embrace of risk in financial markets awash with stimulus. Some argue Bitcoin is also becoming a more mainstream investment with a role to play in hedging risks such as dollar weakness and faster inflation. Others see little more than speculative mania since the digital coin has more than tripled in the past year.

Pinpointing who is mainly responsible for the Bitcoin rally is one of the many crypto mysteries — Bitcoin funds, momentum chasers, billionaires, day traders, companies and even institutional investors have been cited.

For instance, Grayscale Investments, which is behind a popular Bitcoin trust, saw total inflows of more than $3 billion across its products in the fourth quarter. This week, BlackRock Inc. dipped its toe into the crypto universe for the first time, saying cash-settled Bitcoin futures are among assets that two funds were permitted to buy.

Recent comments by Janet Yellen may be among the reasons for this week’s Bitcoin swoon, said Jehan Chu, managing partner with blockchain advisory firm Kenetic Capital in Hong Kong. In her Senate confirmation hearing, Yellen noted cryptocurrency as an area of concern for terrorist and criminal financing.

Describing such fears as “unfounded,” Chu said a “natural correction” is underway and that profit taking won’t “reverse the unprecedented assimilation of Bitcoin into Wall Street’s DNA, leading to $100,000 levels this year.”

Some strategists are more skeptical. For instance, UBS Global Wealth Management recently warned that there’s nothing stopping a wipeout in big-name digital currencies eventually amid regulatory threats and central bank-issued competitors.

“Over the past few days, Bitcoin has been trading approximately 30% lower than the most recent all-time highs, and we’ve seen Asia take profits in Bitcoin in the lead-up to Chinese New Year,” said Fernando Martinez, head of Americas with crypto brokerage OSL. The next key level is $27,750 — if Bitcoin falls through that it could retest $25,800, he said.

Bitcoin was trading at $32,499 as of 10:55 a.m. in New York on Friday. The wider Bloomberg Galaxy Crypto Index rose 1.5%. Shares of cryptocurrency stocks, such as Japan’s Monex Group Inc., slid earlier.

© 2021 Bloomberg L.P.

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This is just a very healthy correction that was expected. I would even be not surprised if it drops to $20,000/BTC. Just hang-on, especially those that bought at the peak. . I also do expect critics to pop-up with all sorts of negative narratives. Just hand tight, the future is bright for BTC.

“Just hang-on” Ha ha. Just hang-on so you can fleece them. Bitcoin relies on one and only one main principle that is if you happen to own a bitcoin you have to wait for some sucker to come along and pay you more for it than you were stupid enough to pay. Capital appreciation of a “token”. Its not like investing in a actual business or company that can grow and be a benefit to a community or country. Bitcoin doesn’t create wealth. Its closer to a parasitic ponzi scheme.

Justin you can call it a ponzi scheme, no real value, etc. My money increased in value by 291% from start of last year up to now (factoring in the current slump). Clearly not bad. And no I don’t use it to buy drugs, lander money, etc. It just add to my financial freedom that I am blessed to enjoy.

How much did your investments grew? I’m sure you are still believing your financial advisor that claims 6%-8% p.a. is a good return and that you should not complain. He just need a handful of people to believe this lie in order to make a good living from your hard earned money.

Just hang in there while it drops to 30k then 25k then 20k then 15k then 10k then 5k then 1k. You can do it.

Still believe it will drop to zero after rising over the 10 years of its existence? I think it is time to move on.

End of comments.

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