An illustration of bitcoin on euro banknotes.
Nicolas Economou | NurPhoto by Getty Images
Bitcoin withdraws from its record highs. The cryptocurrency fell briefly below $ 30,000 on Monday, just two days after it first broke that level.
The price of bitcoin rose to an all-time high over the weekend, exceeding the $ 34,000 mark. This move was followed by an increase in smaller cryptocurrencies, such as ether, which exceeded the $ 1,000 mark for the first time since February 2018.
Bitcoin dropped to $ 29,316 around 5:40 a.m. ET, down 12% in the last 24 hours. It soon rose above the $ 30,000 level, but fell further by more than 10%.
“The most likely explanation for a withdrawal is the takeover of short-term profit by traders rather than long-term investors,” Jason Deane, an analyst at crypto consulting firm Quantum Economics, told the email. “Given the current sentiment and appetite for Bitcoin, it looks like any correction will be short-lived.”
Bitcoin, the largest cryptocurrency in the world by market value, had a historic rally in 2020, advancing by over 300%. Created in 2009, it is seen by lawyers as a decentralized digital currency that abandons the need for any central authority, such as a central bank.
Today, crypto bulls hail bitcoin as a cover for gold-like inflation, in the face of the unprecedented government stimulus aimed at tackling the coronavirus pandemic. A number of institutional investors have shown a keen interest in bitcoin, allocating part of their assets to investing in digital currency.
“There is no denying that Bitcoin has proven to be an established and performing asset,” said Eric Demuth, CEO of digital asset broker Bitpanda. “The value of Bitcoin rose by more than 300% last year as more institutional investors made the leap to embrace digital currencies.”
“We see it emerging as part of the recommended allocation strategy for institutional investors and investment banks.”
Renowned investors such as Paul Tudor Jones and Stanley Druckenmiller came out as bitcoin believers last year, while large financial companies such as PayPal and Fidelity made moves in space. Meanwhile, Square and MicroStrategy have used their own balance sheets to buy bitcoin.
However, skeptics see bitcoin as a speculative asset with no intrinsic value and a market bubble that is likely to explode at some point.
Bitcoin’s performance in 2020 was reminiscent of its frantic rally to nearly $ 20,000 in 2017, which was followed by a sharp withdrawal the following year. However, crypto fans claim that the recent rally is different from the one in 2017, as it was determined by institutional demand rather than retail speculation.