Bitcoin has rewarded investors with massive gains all year, but now the cryptocurrency’s famous volatility is back.
The token plunged below $50,000 in Friday trading for its worst week in almost two months as a proposed tax hike for wealthy Americans intensifies an industry selloff.
While the digital token is known for its big price swings, this latest bout has been particularly head-spinning after the all-time high notched on April 14.
Still, talk to investors and analysts and many will say it was a long time coming — with last week’s rally in the satirical Dogecoin and the eye-watering valuation for Coinbase Global Inc. clear signs of market froth.
Here’s what market players are saying about the crypto slump. Comments have been edited and condensed.
Ulrik Lykke, executive director at crypto hedge fund ARK36
“Throughout April, the markets have been slightly overheated due to a large number of margin and leveraged traders. This caused a runup and the correction was only to be expected. In addition, traders’ anxiety and the overall emotional nature of the crypto markets also may have played a role.
“Notably, though, the price of Bitcoin fell only 25% from the recent all-time high and there are reasons to believe the overall trend will remain bullish unless the price drops below $40,000.”
Felix Dian, founder of crypto investment fund MVPQ Capital
“Looking at the previous bull cycle (2016/17), there have been quite a few occurrences when Bitcoin loses momentum and dips below the 100-day moving average. This one was overdue.
“We are actually seeing record subscriptions into our fund this month, from institutional family offices, with many willing to use this as an opportunity to add. Ultimately, strong hands buying will meet the lack of available liquid supply of Bitcoin, triggering a squeeze and further down the road a new retail FOMO wave.”
Jeffrey Halley, senior market analyst for Asia Pacific at OANDA
“The threat of regulation, either directly in developed markets or indirectly via the taxman, has always been crypto’s Achilles’s heel.
“Hopefully, we will hear as many ‘experts’ saying this is a sign of Bitcoin becoming a ‘maturing mainstream asset’ if it falls 10% this weekend, as we do when it rises, or a crypto-exchange chooses to IPO. In the meantime, don’t hate me for being bearish Bitcoin in the near term.”
Nikolaos Panitgirtzoglou, strategist at JPMorgan Chase & Co
“Institutional demand has indeed slowed. I’m not sure what could trigger a re-acceleration of institutional demand. You either need a big announcement like Tesla or simply a correction and clearing of retail froth to incentivise institutional investors to re-enter the market.”
Philip Gradwell, chief economist of Chainalysis, a crypto reasearch firm
“The Coinbase listing was the end of the beginning for crypto. So what do such price movements in the first week of a new phase mean? To be honest, I don’t think they mean that much.
“Prices are still historically high and the fall over the weekend appears to have been a fairly standard reversal after peak prices, which was magnified by three factors. First, the liquidation of a record number of leveraged bets. Second, there had been a build up of Bitcoin on exchanges, which is typical when people are waiting to see if the price will continue to rise or reverse. When it reversed these holders likely rapidly sold. Third, all of this happened in an illiquid weekend market that appeared to have relatively few buyers.”
— With assistance by Yakob Peterseil, Joanna Ossinger, and Anchalee Worrachate