Hong Kong: Bitcoin dropped below $ 30,000 on Friday, extending a retreat from an all-time high set two weeks ago and keeping fresh questions about the sustainability of the cryptocurrency boom.
The digital coin slipped as much as 7.7 percent to about $ 28,818 in Asian trading before standing just above $ 30,000. Commentators have warned that a continued fall below the final level could lead to further losses. The largest cryptocurrency is on track for one of its worst weeks since the pandemic markets rolled in March 2020.
“This level looks very fragile and a break under it is bad news in the near term for Bitcoin and cryptos in general,” Craig Erlam, senior market analyst at Oanda Europe, wrote in a note. “I wouldn’t be surprised to see $ 20,000 tested before too long.”
Bitcoin’s surge to a record nearly $ 42,000 on Jan. 8 incorporated a risk-taking embrace in financial markets waking up with impetus. Some argue that Bitcoin is also becoming a more mainstream investment with a role to play in risky hedges such as dollar weakness and faster inflation. Others see little more than speculative mania as the digital coin has more than tripled in the past year.
Pinpointing which is primarily responsible for the Bitcoin rally is one of the many crypto mysteries – Bitcoin funds, momentum chasers, billionaires, day traders, companies and even institutional investors have all been quoted.
For example, Grayscale Investments, which is behind the popular Bitcoin trust, saw total inflows of more than $ 3 billion across its products in the fourth quarter. This week, BlackRock Inc. immersed his foot in the crypto universe for the first time, saying that the future of Bitcoin settled with cash was among assets that two funds were allowed to buy.
Yellen is not keen
Recent comments from Janet Yellen may be among the reasons for this week’s Bitcoin swoon, said Jehan Chu, a managing partner with blockchain advisory firm Kenetic Capital in Hong Kong. In her Senate confirmation hearing, Yellen identified crypotcurrency as an area of concern for terrorist and criminal finance.
Describing fears as “baseless”, Chu said a “natural correction” is under way and that profit-taking will not “reverse the unprecedented assimilation of Bitcoin into Wall Street DNA, resulting in $ 100,000 levels this year.”
Some strategists are more skeptical. For example, UBS Global Wealth Management recently warned that in the midst of regulatory and competitor threats issued by a central bank, there is nothing stopping drying up in big-name digital currencies.