Bitcoin's volatile week rattles faith in cryptocurrency resurgence

Topics Bitcoin | cryptocurrency

The digital coin could “easily be $35,000 again tomorrow or could drop through $30,000 and test notional support at $27,000.”
The sharp selloff in Bitcoin this week is stoking fresh questions about the sustainability of the cryptocurrency boom.

 

Prices for the digital asset have tumbled 14 per cent this week, marking the steepest decline since March. Bitcoin was steady on Friday, holding near $31,000 and commentators have cautioned that a sustained drop below $30,000 could presage further losses.

 

“Being Bitcoin, a 10 per cent range intraday is a mere flesh wound to the digital asset, in a world where tradable versus investible is seriously blurred,” said Jeffrey Halley, senior market analyst at Oanda Asia Pacific. 

 

The digital coin could “easily be $35,000 again tomorrow or could drop through $30,000 and test notional support at $27,000.”

 

Bitcoin’s surge to a record of almost $42,000 on January 8 embodied the embrace of risk in financial markets awash with stimulus. Some argue Bitcoin is also becoming a more mainstream investment with a role to play in hedging risks such as dollar weakness and faster inflation.

 

Others see little more than speculative mania since it has more than tripled in the past year. Pinpointing who is mainly 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 been cited.

 

For instance, Grayscale Investments, which is behind a popular Bitcoin trust, saw total inflows of more than $3 billion across its products in the fourth quarter. This week, BlackRock dipped its toe into the crypto universe for the first time, saying cash-settled Bitcoin futures are among assets that two funds were permitted to buy.



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