Bitcoin Tumbles Below $50,000 as
Caution About Rally Takes Hold
Bitcoin Tumbles Below $50,000 as Caution About Rally Takes Hold
- Bitcoin slid Tuesday after a bout of volatility highlighted lingering doubts about the durability of the token’s mesmerizing rally.
The cryptocurrency fell as much as 11% to below $50,000. At one point Monday the digital currency plunged 17% before paring the worst of the slide. It’s still up some 400% in the past year, a rise that dwarfs other assets.
Treasury Secretary Janet Yellen and Microsoft Corp. co-founder Bill Gates were the latest to weigh into a debate over the digital coin. Gates cautioned about how investors can be swept up in manias, while Yellen said Bitcoin is an “extremely inefficient way of conducting transactions.”
In the background are jitters that the global economic recovery from the pandemic will eventually prompt central banks to dial back easy-money policies that helped propel Bitcoin higher. At a technical level the digital currency looks stretched, according to Miller Tabak + Co.
A monthly relative-strength index for Bitcoin is “extremely overbought,” the company’s chief market strategist Matt Maley wrote in a weekend note.
Gates and Yellen muscled in on a Bitcoin discussion that of late had been dominated by Tesla Inc. Chief Executive Officer Elon Musk. In recent tweets, Musk said Bitcoin prices “seem high,” having earlier called it a “less dumb” version of cash.
Tesla this month disclosed a $1.5 billion investment in Bitcoin, while MicroStrategy Inc. boosted a sale of convertible bonds to $900 million to buy even more of the token.
Bitcoin faithful argue the digital currency emerging as a hedge for risks such as faster inflation and set to win more attention from corporate treasurers and institutional investors. Others see speculators playing a bigger role and some echoes of the digital coin’s 2017 boom and bust.
“It’s a pure speculative asset,” said Nader Naeimi, head of dynamic markets at AMP Capital Investors in Sydney.
A pullback in Bitcoin shouldn’t be surprising “given the current overleveraged long positions on mainstream coins,” said Annabelle Huang, a partner at Amber Group, a crypto financial-services firm.
Bitcoin was trading at about $49,720 as of 1:17 p.m. in Hong Kong on Tuesday.
Bitcoin Declines After Musk Hints That Prices Are Excessive
- Crypto sank as much as 17% in its biggest slide since March
- Tesla CEO tweeted on Saturday that prices ‘seem high’
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Elon Musk’s embrace of Bitcoin earlier this month rocketed the cryptocurrency almost 50% higher to more than $58,000. His cold shoulder this weekend whipsawed the largest digital asset.
Bitcoin was down about 5.6% after plunging as much as 17% earlier Monday. The digital asset briefly drifted below $50,000, giving up more than $8,000 in a matter of hours after the world’s richest man tweeted his concern that the price had risen too high too quickly.
“Elon and his fleet have incredible power over market prices,” said Mati Greenspan, founder of Quantum Economics, comparing Musk’s influence over the digital asset’s price moves to Warren Buffett.
Long-time Bitcoin skeptic and now Treasury Secretary Janet Yellen also offered a stark warning, saying at a New York Times conference on Monday that the token is an “extremely inefficient way of conducting transactions.”
Even other billionaires are weighing in on Musk’s comments. Microsoft Corp. co-founder Bill Gates said in an interview with Bloomberg Television’s Emily Chang that he isn’t a fan of Bitcoin, either for environmental reasons -— it uses a lot of energy -— or for individual investors not named Elon Musk.“Elon has tons of money and he’s very sophisticated so I don’t worry that his Bitcoin will sort of randomly go up or down,” Gates said. “I do think people get bought into these manias who may not have as much money to spare, so I’m not bullish on Bitcoin, and my general thought would be that if you have less money than Elon you should probably watch out.”
It’s widely believed that volatile weekend swings are driven by individuals trading the cryptocurrency at home. So it’s also possible that prices fell on Monday as institutional crypto traders, who follow normal business hours, responded to Musk’s Saturday tweet that Bitcoin and Ether prices “seem high.”
The world’s largest cryptocurrency had been on a tear this month, propelled by purchases from Musk’s Tesla Inc. and institutional investors who say Bitcoin is an attractive alternative to gold and the dollar. Skeptics have warned that the rally is a bubble born of massive government stimulus and excess liquidity from central banks.
In February alone, Bitcoin was up more than 60%, prompting commentary that the run-up is excessive. The digital token hit a new all-time high on Sunday and came close to surpassing $59,000. It traded at around $54,100 as of 5:41 p.m. in New York.
So-called altcoins fell in tandem. Ether, the second largest cryptocurrency by market value, plunged as much as 19% before paring losses to about 13%. The Bloomberg Galaxy Crypto Index, which measures the performance of the largest digital assets, fell as much as 18%.
Meanwhile, JPMorgan Chase & Co. strategists have warned about Bitcoin’s declining liquidity. Strategist Nikolaos Panigirtzoglou wrote in a note on Friday that liquidity for the digital coin was lower than that for the S&P 500 Index and gold, meaning “even small flows can have a large price impact,” he wrote.
“It should go without saying that new investors to Bitcoin should be prepared for major volatility and for prices to drop suddenly and as sharply as they have risen,” according to Neil Wilson, chief analyst at Markets.com.
TIPS & TRICKS
BITCOIN IS LITTLE DOWN BUT DON'T WORRY IT WILL COME UP AND IT WILL BE FINE. AND DON'T SELL NOW CAUSE A FAMOUS INVESTOR SAID BE GREEDY WHEN OTHER ARE GIVING AND GIVE WITH OTHER GREEDY. THIS MEANS THAT BUY WHEN OTHERS SELL AND SELL WHEN OTHERS BUY. SO BUY WHEN LOW CAUSE YOU ARE BTC AT LOW PRICE.
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