Bitcoin Takes a Hit for a Second Straight Day

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On Thursday, Bitcoin has fallen for a second consecutive day to slip below its 10-day moving average. The cryptocurrency’s torrid rally has lost some steam this week as according to price data consolidated by Bloomberg, it is down as much as 8.4% over a two-day downfall and was trading at $34,546 as of 11:50 a.m. in Hong Kong on 21 January.

The second-largest digital asset, Ether, which is built on the open-source Ethereum blockchain, hit an all-time high of $1,448 on Tuesday. However, on Thursday, it is holding at about $1,330. On Wednesday, other prominent cryptocurrencies such as a tether, ripple, and stellar traded 0.18%, 7%, and 6% lower, respectively.

The rout began just hours after Bitcoin rose to within $7 of its record high of $19,511, the culmination of a more than 250% surge in the past nine months. Fears over tighter crypto regulation and profit-taking after a frenetic rally were among the reasons cited for the sudden drop.

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The sell-off gathered pace late Wednesday after Coinbase Inc. Chief Executive Officer Brian Armstrong tweeted about speculation the U.S. is considering new rules that would undermine anonymity in digital.

About other Cryptocurrencies

Most cryptocurrencies are notoriously volatile and the increase in institutional participation may be making things worse. While demand would increase and volatility ease should corporations hold Bitcoin for business purposes, the opposite is true when institutions gain exposure for speculative purposes.

Empirical evidence from other asset classes suggests that higher participation by institutional investors could increase volatility because of their more opportunistic investment approach

“News that the Trump administration may clamp down on crypto might have been a trigger for the drop,” said Antoni Trenchev, managing partner of Nexo in London, which bills itself as the world’s biggest digital-coin lender. “But any asset that rallies 75% in 2 months and 260% from the March lows is allowed to undergo a correction.”

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Other coins including XRP tumbled as much as 27%, according to prices compiled by Bloomberg.

After garnering more support from Wall Street money managers and fund providers, the rally in cryptocurrencies had looked over-heated. The fierce retreat could stir yet another debate over their value in diversifying portfolios.

Investors who have kept a close eye on Bitcoins would recollect that a similar rally in 2017 was followed by a huge crash. In 2017, Bitcoin rallied from the low of around $790 to a peak of $1,9041 in December, however, in 2018, it crashed by 74%.

Even now, especially considering the sudden spike in volatility and increasing institutional participation, many experts have been warning of a bubble building up in Bitcoins.

 

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Harshit Bhasin
Harshit Bhasin
I’m a student currently doing B.A(hons) English from Dyal Singh College, Delhi University. I like to read and write and apart from it, I like watching movies, series, animated series (Animes) and playing games. I’m also a sportsperson and I like to perform outside activities regularly.

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