Bitcoin Bubble Crashes 22 Percent Since Friday, Other Cryptos Get Smashed Harder
Bitcoin ended last week 26 percent higher, then crashed as much as 21 percent Sunday and Monday in the biggest two-day slide since March, wiping $200 billion off the market for itself and other digital coins in 24 hours.
The sell-off in cryptocurrencies signals some profit-taking from investors, CNBC reported.
Bitcoin broke through $40,000 for the first time last week, then fell to less than $37,000 Thursday night before recovering as much as 10.4 percent. It traded as high as $41,973 Friday before crashing 22 percent Monday.
Charlie Bilello, founder and CEO of Compound Capital Advisors, described bitcoin’s most recent crash as “the first major correction since hitting a new all-time high last November.”
Financial regulators worry that amateur investors could get sucked into cryptocurrencies such as bitcoin, only to lose money when their value collapses, as bitcoin’s did in 2018.
“If consumers invest in these types of product, they should be prepared to lose all their money,” Britain’s Financial Conduct Authority said in a statement, according to Business Insider. “Significant price volatility in cryptoassets, combined with the inherent difficulties of valuing cryptoassets reliably, places consumers at a high risk of losses.”
The British authority warned that “there is no guarantee that cryptoassets can be converted back into cash. Converting a cryptoasset back to cash depends on demand and supply existing in the market.”
In late December, Scott Minerd, chief investment officer with Guggenheim Investments, predicted that bitcoin could eventually reach $400,000. “Bitcoin’s parabolic rise is unsustainable in the near term,” Minerd tweeted on Sunday. “Vulnerable to a setback. The target technical upside of $35,000 has been exceeded. Time to take some money off the table.”
Not everyone one thinks the correction is a bad thing, and it’s too soon to know if this is a sign of a worse correction to come.
“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 more than quadrupled in the past year, raising the specter of the bitcoin madness of 2017 “that first made cryptocurrencies a household name before prices collapsed just as quickly,” Yahoo Finance reported.
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“Corrections are healthy in a bull market, it’s a pretty simple concept. Who wants to buy BTC at an ATH? This correction will give new comers the opportunity to buy into this network,” a Twitter user said.
Bitcoin bulls say it’s different this time. Institutional investors and the super-rich are buying up the cryptocurrency. It has matured from past boom-bust cycles and is seen more and more as “digital gold” — a legitimate hedge against inflation and a weak dollar. Others worry that the rally has no bearing on reality and is fueled by government stimulus in response to the coronavirus pandemic, with bitcoin unlikely to ever be viable as an alternative currency.
The value of the overall cryptocurrency market was down from $1.08 trillion on Sunday to $880 billion at 9:20 a.m. Monday, according to Coinmarketcap. The second-largest cryptocurrency, ether (ETH), was down 23 percent to $1,005. Bitcoin is still up more than 300 percent in the last 12 months, CNBC reported.
There were calls on Twitter for patience. “expect these drawdowns, keep averaging in, manage expectations, be patient,” a Twitter user said. “Don’t panic,” a trader suggested, adding, “don’t sell until it’s back at 4,000”.