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Two-day bitcoin plunge shakes faith in cryptocurrency boom

Rival assets also slump.
Image: Bloomberg
A steep selloff in Bitcoin is fuelling concern that the cryptocurrency bubble may be about to burst.Bitcoin slid as much as 26% over Sunday and Monday in the biggest two-day slide since March. After recovering some of the losses during the European session, the digital asset has turned lower again to drop more than 20% during New York trading hours. Bitcoin has wiped out about $185 billion in value since Friday, more than the market capitalisation of 90% of individual companies in the S&P 500.

“It’s to be determined whether this is the start of a larger correction, but we have now seen this parabola break so it might just be,” said Vijay Ayyar, head of business development with crypto exchange Luno in Singapore.

Bitcoin has more than quadrupled in the past year, evoking memories of the 2017 mania that first made cryptocurrencies a household name before prices collapsed just as quickly. Prices almost reached $42,000 on Jan. 8 with retail traders and Wall Street investors clamoring for a piece of the action.

Read: Why Bitcoin’s price is at an all-time high

“It was a parabolic move,” said Matt Maley, chief market strategist at Miller Tabak + Co. “What happens with all parabolic moves? You see severe corrections.”

While Maley sees Bitcoin moving much higher over the long term, it will still experience severe corrections along the way, he said.

“It will still have big declines of anywhere from 30-60%,” he said. “And it’s going to happen more than once.”

Bitcoin slid 14% to around $32,900 as of 12:51 p.m. in New York. Other coins including Bitcoin Cash, Ether and Litecoin fell even more.

“Time to take some money off the table,” Scott Minerd, chief investment officer with Guggenheim Investments, said in a tweet from his verified Twitter account. “Bitcoin’s parabolic rise is unsustainable in the near term.” In late December, Minerd predicted Bitcoin could eventually reach $400,000.

True believers in Bitcoin argue the rally this time is different from past boom-bust cycles because the asset has matured with the entry of institutional investors and is increasingly seen as a legitimate hedge against dollar weakness and inflation risk. Others worry that the rally is untethered from reason and fuelled by vast swathes of fiscal and monetary stimulus, with Bitcoin unlikely to ever serve as a viable currency alternative.

With so many investors wanting to get rich on Bitcoin, the asset is drawing the attention of regulators. On Monday, the U.K.’s financial watchdog issued a stark warning for consumers looking to profit from crypto: be ready to lose everything.

“Investing in crypto assets, or investments and lending linked to them, generally involves taking very high risks with investors’ money,” the Financial Conduct Authority said in a statement. The FCA’s concerns include price volatility, the complexity of products offered and the lack of consumer protection regulation around many of the products.

© 2021 Bloomberg L.P.

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Its shaking of the speculators, the should come down to a stable $21,000 with a downward spike of $15,000 then bouncing back to $30,000 to $80,000 as we away the US Dollar 50th Anniversary on 15th August 1971.

An extra $9Trillion of stimulus debt to the Market should give inflation a boost.

Still in it for the long run, between $400,000 and $1,000,000.
As long as those money printing machines run and devalue their currency, BITCOIN is a Permanent Buy

Very true. One should just time it right. BTC a long term asset to remain.

Maybe spread investments across a few (promising) crypto, in case BTC gets kids off the global stage by new, upcoming cryptos showing future promise.

A riskier gamble is the JSE 😉

I cannot belief this, seems like Mr Michael has had a second look at BTC.

Nothing will be able to compete with BTC, it has no owner and verifies its own transactions. Crypto copy cats like ETH and the rest have ownership over the coding and computational power just like central banks and their printing presses.

Whilst i see BTC as Gold 2.0, a coin that will be a good purchase will be one thats value is derived from BTC yet allows for transactions to occur faster and cheaper whilst being widely accepted.

This could become the second major correction since invested in Dec 2017. Worth noting that at about 22,000 $/BTC some analyst predicted a 20-30% correction so this has been anticipated. During the first correction (early 2018) I panicked and made stupid errors (sell & buy during downward slide). This time I am holding and see it for what it is (healthy correction).

Critics will soon call this a crash, predict that it will plunge to zero, etc.

End of comments.

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