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Bitcoin and other digital currencies tumbled on Thursday, a drop that will likely fuel speculation about the durability of the cryptocurrency boom.
Bitcoin plummeted to 8.7%, the most since the beginning of August, while digital currencies like Ether also fell. The Bloomberg Galaxy Crypto Index at one point slipped more than 6%.
“Conditions are massively overbought and destined for a correction,” said Vijay Ayyar, head of business development at the Luno crypto exchange in Singapore. “So, frankly, I don’t think it’s unusual.”
Even with the withdrawal, Bitcoin has more than doubled this year and was until recently knocking on the door from the record of $ 19,511 set in 2017. Crypto believers tout purchases from retail investors, institutions, and even billionaires, as well as search of a hedge against a weak dollar amid the pandemic, as reasons the boom may last.
Skeptics argue that the famous cryptocurrency volatility heralds a repeat of what happened three years ago, when a bubble spectacularly burst. Some see signs that retail investors are piling up to chase the quick profit momentum, piling up an inevitable reckoning.
Bitcoin fell 5.4% at 3:07 pm in Tokyo to around $ 17,856, while Ether was down more than 8% to around $ 528.
Concerns about the possibility of stricter crypto rules in the US, as well as profit taking, help explain Thursday’s price drop in most major digital assets, said Ryan Rabaglia, global head of trading at the OSL brokerage in Hong Kong.
“It is also not unusual to see a short-term pullback after periods of significant and accelerated earnings, as traders look to profit before resetting once volatility subsides,” he said. “Once the dust settles, we are back to normal with all medium to long-term bullish indicators still in play.”
Proponents of digital assets say that the current focus on cryptocurrencies compared to three years ago is different due to growing institutional interest, for example, from companies like Fidelity Investments and JPMorgan Chase & Co.
Just this week, Van Eck Associates launched a publicly traded Bitcoin note on the Deutsche Boerse Xetra exchange. In October, PayPal Holdings Inc. said it would allow its customers to access cryptocurrencies.
There is also a rumor surrounding Ethereum, the most widely used blockchain in the world, which is set for a network upgrade that would allow it to process a similar number of transactions like Mastercard and Visa. The switch to the new system could slow the total supply of Ether, whose price has quadrupled so far this year.
Ayyar de Luno said that he expects Bitcoin to stabilize and hit all-time highs. But that would be followed by a bigger drop in the cryptocurrency, he said.
