Bitcoin steadies after rally breaking slump
LONDON: Bitcoin and other digital peers steadied Friday after posting some of the biggest declines since the onset of the pandemic, a sell off that stoked fresh questions about this year’s boom in cryptocurrencies.
A day after tumbling 9.7%, Bitcoin edged higher to $17,050 at 9:05 am in London. Ethereum was steady at $514.50, while XRP rose 3% to 53.65 cents.
Fears over tighter crypto regulations and profit-taking after a frenetic rally were among the reasons cited for Thursday’s selloff.
“After big rallies in shares and various other assets, they are all vulnerable to a bit of a pause,” said Shane Oliver, head of investment strategy at AMP Capital Investors Ltd. in Sydney. “But Bitcoin more than most, as it surged higher far more and had become far more frothy with speculative interest.”
The slump pared Bitcoin’s rally this year to about 130%, an advance that has split opinion. Crypto believers tout a broadening investor base and the search for a hedge against dollar weakness amid loose monetary policy as reasons for a durable boom. Set against that is a history of big swings, including the run up to a record three years ago that was followed by a spectacular bust.
Proponents of digital assets say the current focus on cryptocurrencies compared with 2017 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 customers access to cryptocurrencies.
Others see signs of retail investors piling in to chase momentum for fast gains, storing up an inevitable reckoning. The rout in Bitcoin began just hours after it rose to within $7 of its record high of $19,511 set in December 2017.
Concern about potential US 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 long-term bullish indicators still in play.”
Profit-taking was inevitable and there are still factors in favour of Bitcoin as an asset class, according to Byron Goldberg in Sydney, who runs the Australian operations for Luno, the cryptocurrency exchange and trading platform.