Bitcoin craters along with other digital coins
Bitcoin plunged on Thursday in a sell-off that saw other digital assets fall more than 20 per cent, a slide likely to stoke speculation about the durability of the latest boom in cryptocurrencies.
The largest token fell as much as 14 per cent in Thursday trading, heading for one of its worst days since the pandemic-spurred liquidation in March.
The rout began just hours after Bitcoin rose to within US$7 of its record high of US$19,511, the culmination of a more-than250-per-cent 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.
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 per cent in two months and 260 per cent from the March lows is allowed to undergo a correction.”
Other coins including XRP tumbled as much as 27 per cent, prices compiled by Bloomberg show.
After garnering more support from Wall Street money managers and fund providers, the rally in cryptocurrencies had looked overheated. The fierce retreat could stir yet another debate over 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.
Skeptics 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.
Proponents of digital assets say the current focus on cryptocurrencies compared with three years ago is different because of growing institutional interest.