Bitcoin, other cryptocurrencies plunge
Bitcoin plunged Thursday in a selloff that saw other digital assets fall as much as 27 percent, a slide likely to stoke speculation about the durability of the latest boom in cryptocurrencies.
The largest token fell more than 8 percent in Thursday trading after slumping as much as 13 percent, heading for one of its worst days since the pandemic-spurred liquidation in March.
The rout began just hours after Bitcoin rose to within $7 of its record high of $19,511, the culmination of a more than 250 percent surge in the 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 selloff 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 cryp-to 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 percent in 2 months and 260 percent from the March lows is allowed to undergo a correction.”
Other coins including Xrp tum-bled as much as 27 percent, prices compiled by Bloomberg showed.
After garnering more support from wall Street moneymanagers and fund providers, the rally in cryptocurrencies had looked overheated. 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.
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.
“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 longterm 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 also is 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. 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 stabilize and achieve all-time highs. But that would be followed by a larger drop in the cryptocurrency, he said.
Soravis Srinawakoon, chief executive of Bangkok-based Band Protocol, said the plunge in crypto was healthy.
“This is just a normal pull back after seven weeks straight of Bitcoin in the green, due to many people over-leveraging,” Srinawakoon said.