BITCOIN FALLS BELOW US$50,000 AS FEAR SWEEPS THROUGH CRYPTO.
Bitcoin’s losses accelerated Tuesday, with prices tumbling below US$50,000, as investors started to bail on the market’s frothiest assets.
The cryptocurrency tanked as much 18 per cent on Tuesday and traded around US$47,145 as of 3:37 p.m. in New York. While the selloff only puts Bitcoin prices at the lowest in about two weeks, investors are starting to wonder whether it marks the start of a bigger retreat from crypto or simply represents volatility in an unpredictable market.
“We advise clients to practice caution with crypto speculation,” UBS Global Wealth Management chief investment officer Mark Haefele said in a statement. “Alongside unresolved regulatory risks, the future usage case remains unclear.”
After more than doubling since December, Bitcoin swooned this week with the high-flying stocks that have been among the best performers over the past year as a selloff in the momentum trade accelerated. While tech-heavy equity benchmarks like the Nasdaq surged back into positive territory late Tuesday, Bitcoin continued to linger near the lows of the day.
Elon Musk’s comments over the weekend saying the prices of Bitcoin and Ether “seem high” were viewed as the initial catalyst for the selloff. Musk had helped trigger the rally when his Tesla Inc. disclosed on Feb. 8 that it had added US$1.5 billion in Bitcoin to its balance sheet.
U.S. Treasury Secretary Janet Yellen weighed in as well, saying at a New York Times conference on Monday that the token is an “extremely inefficient way of conducting transactions.”
Microsoft Corp. cofounder Bill Gates said in an interview with Bloomberg Television’s Emily Chang, that he’s not a fan of Bitcoin and warned against retail investors being swept up in speculative manias.
“It’s a pure speculative asset,” said Nader Naeimi, head of dynamic markets at AMP Capital Investors in Sydney.
Other markets that have seen massive gains this year sold off sharply on Tuesday. Tesla Inc. sank as much as 13 per cent, and Cathie Wood’s flagship Us$28-billion ARK Innovation ETF dropped as much as 12 per cent at one point. The Bloomberg Galaxy Crypto Index, which spans Bitcoin, Ether and three other digital tokens, declined as much as 21 per cent.
Tesla shares wiped out their year-to-date gains Tuesday and briefly traded below the level where they were when the electric-car maker entered the S&P 500 Index in December.
The stock’s 13-per-cent drop was its biggest intraday decline since Sept. 8, before paring much of the loss to close down 2.2 per cent at US$698.84. The stock was down 31 per cent from its Jan. 25 record intraday high at its lowest point on Tuesday.
Bitcoin did rise from the lowest levels of the day after crypto exchange Bitfinex settled a probe with New York Attorney General Letitia James over allegations that it hid the loss of commingled client and corporate funds and lied about reserves. Some market participants say that the agreement, which included US$18.5 million in penalties, lifts a cloud over the cryptocurrency market.
“On the grand scale of things, it’s less than a speeding ticket,” said Antoni Trenchev, managing partner and co-founder of Nexo in London, a crypto lender. “I’m just excited that they will be revealing more numbers so that we can accurately assess and hopefully that will create some comfort for the market participants.”
Bitcoin prices have soared more than 50 per cent this year as more investors buy in to the argument that digital currencies can act as a hedge against inflation. A pullback in Bitcoin shouldn’t be surprising “given the current over-leveraged long positions on mainstream coins,” said Annabelle Huang, a partner at Amber Group, a crypto financial-services firm.