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Crypto boom shaken as bitcoin plunges along with other coins

Analysts suspect the shift is due to profit-taking after the recent rally and tighter regulation speculation.
Image: Shutterstock
Bitcoin plunged on Thursday in a sell-off that saw other digital assets fall as much as 27%, a slide likely to stoke speculation about the durability of the latest boom in cryptocurrencies.The largest token slumped as much as 13%, potentially heading for its worst day since the pandemic was declared in March.The rout began just hours after Bitcoin rose to within $7 of its record high of $19,511, the culmination of a 250% surge in past nine months. Fears over tighter crypto regulation and profit-taking after a frenetic rally were among the reasons cited for the sudden drop.

Read:
Bitcoin hits seriously overbought territory, but the ride may not be over
Bitcoin pierces $19,000 for first time since 2017

The sell-off gathered pace late Wednesday after Coinbase Inc. Chief Executive Officer Brian Armstrong tweeted about speculation the U.S. is considering new rules that would undermine anonymity in digital transactions.

“News that the Trump administration may clamp down on crypto might have been a trigger for the drop,” said Antoni Trenchev, managing partner of Nexo in London, which bills itself as the world’s biggest digital-coin lender. “But any asset that rallies 75% in 2 months and 260% from the March lows is allowed to undergo a correction.”

Other coins including XRP tumbled as much as 27%, according to prices compiled by Bloomberg.

Bitcoin and Ethereum prices over 12 months

After garnering more support from Wall Street money managers and fund providers, the rally in cryptocurrencies had looked over-heated. The fierce retreat could stir yet another debate over the their value in diversifying portfolios.

“Conditions are very massively overbought and bound for a correction,” said Vijay Ayyar, head of business development with crypto exchange Luno in Singapore. “So I don’t think it’s unusual.”

Crypto believers tout purchases by retail investors, institutions and even billionaires, as well as the search for a hedge against dollar weakness amid the pandemic, as reasons why the boom can last.

Sceptics argue the cryptocurrency’s famed volatility portends a repeat of what happened three years ago, when a bubble burst spectacularly. Some see signs of retail investors piling in to chase momentum for fast gains, storing up an inevitable reckoning.

Concern about potential U.S. crypto rules help explain Thursday’s price drop across most major digital assets, said Ryan Rabaglia, global head of trading at OSL brokerage in Hong Kong.

“It’s also not unusual to see a short-term pullback following periods of significant, accelerated gains as traders look to take profits before resetting once volatility subsides,” he said. “Once the dust settles, we’re back to business as usual with all medium to long-term bullish indicators still in play.”

Proponents of digital assets say the current focus on cryptocurrencies compared with three years ago is different because of growing institutional interest, for instance from the likes of Fidelity Investments and JPMorgan Chase & Co.

Just this week, Van Eck Associates Corp. launched a Bitcoin exchange-traded note on the Deutsche Boerse Xetra exchange. In October, PayPal Holdings Inc. said it would allow its customers access to cryptocurrencies.

There is also a buzz around Ethereum, the most-actively used blockchain in the world, which is set for a network upgrade that would allow it to process a similar number of transactions as Mastercard Inc. and Visa Inc.

Read: Ethereum races clock to collect enough coins for huge upgrade

The shift to the new system could curb the total supply of Ether, whose price has quadrupled so far this year.

Luno’s Ayyar said he expects Bitcoin to stabilise and achieve all-time highs. But that would be followed by a larger drop in the cryptocurrency, he said.

© 2020 Bloomberg L.P.

Listen: Brandon Topham of the Financial Sector Conduct Authority, explains why crypto regulation is coming and how it will help unearth scams. 

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I only buy when there’s a bit of despondency in crypto. The previous mania of 2017 was followed by sadness. I’ll wait for this mania to subside a bit and then get some more.

Wise decision … BTFD … Buy The F’ing Dip

This correction is perfectly normal for Bitcoin; in fact it should drop further to at least the 20 week moving average(30% drop), maybe even the 50 week moving average currently at around $12300.

We look at it as the markets giving us an early Black Friday discount and will RCA all the way down.

Fundamentals remain strong with significant institutional demand while the retail market is still nowhere to be seen.

Clearly cryptocurrency has a set of unwritten rules…

that are made up as things move along.

Still keeping very far away from it thank you very much.

End of comments.

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