The Bitcoin rollercoaster has returned to diving. Cryptocurrency fell by up to 15% on Sunday, and rival currencies such as Ether and XRP also fell.
The withdrawal came after Bitcoin hit a record $ 64,000 mark on Wednesday, when the largest chip exchange in the United States, Coinbase Global Inc., debuted enthusiasm for all cryptocurrencies.
While prices held later on Sunday in early Asia, trading on Monday, with Bitcoin holding around $ 57,000, it is still down about 12% from last week’s intraday peak.
So what triggered the slide?
As is often the case – especially with assets as opaque as cryptocurrencies, where it is often unclear who sells or buys – there is no single answer. Analysts point to a bag of reasons.
As digital assets continue to engage with retail and institutional investors, regulators around the world are becoming more interested.
On Friday, the Turkish central bank said it would do so prohibits their use as a form of payment from 30 April and would prohibit companies that manage electronic payments and remittances from processing transactions involving cryptographic platforms.
There was also online speculation over the weekend that the US Treasury is ready to combat money laundering through digital assets. The Treasury declined to comment.
Other sources of regulatory pressure include central banks’ plans to create digital currencies such as China for the yuan and for banning the exploitation of cryptocurrencies in Inner Mongolia, long a favorite of the industry due to its cheap power.
“We will see more regulations coming,” said Eva Ados, chief investment strategist at ERShares asset manager at Bloomberg TV, warning investors to be “very careful.” “We believe there will be even more volatility in the future.”
Any big rally offers the market potential to be surpassed.
This is the view of Galaxy Digital founder and longtime cryptographer Michael Novogratz, who wrote on Twitter that he sees the withdrawal as a healthy fix.
Other things could be added to the mix. Industry news site CoinDesk reported on Saturday that power outages in parts of China have eliminated a significant amount of Bitcoin mining capacity, which has reduced the total processing power of the cryptocurrency network.
There is also time.
“Bitcoin is going crazy over the weekend because it is one of the few markets open for trading,” said Kyle Rodda, a Melbourne-based market analyst at IG. “And he lost some support for the purchase.”
How significant are the drops?
Given the frequent warnings in the usual financial figures about a speculative mania in cryptocurrencies, any substantial decline raises memories of the collapse of 2017. At that time, Bitcoin fell from over $ 19,000 to under $ 4,000 by the end of 2018.
Although the current withdrawal is notable, it is not on this scale. Bitcoin is still 93% higher than in January. Volatility is routine for the asset class: the 15% drop on Sunday was only the biggest since February.
Ether, which fell by up to 18 percent before closing 9.4 percent lower on Sunday, rose more than 200 percent this year.
What is the price outlook?
The problem with any kind of price prediction for cryptocurrencies is that there are not a lot of fundamental values to underpin predictions. Much boils down to the best assumptions about whether institutional investors will buy and whether Bitcoin whales will sell. Less than 2% of accounts controls 95% of the available supply, according to researcher Flipside Crypto. This means that a large holder can have an oversized impact on the still illiquid market.
An essential difference for the prolonged collapse of 2017 is that a wide range of institutional investors now have a stake in the market. Brevan Howard Asset Management became the latest money manager last week it is said to invest in digital assets.
Read more: Dan Loeb is the latest billionaire to sink the world Crypto
In another sign of the growing interest of the rich, both Morgan Stanley and Goldman Sachs Group Inc. now intends to give customers access to cryptographic investments. In January, analysts at JPMorgan Chase & Co. suggested that Bitcoin has the potential to reach $ 146,000 in the long run, a target they recently reduced to about $ 130,000.
“The passions are deep in terms of the likely short-term path to encryption,” Chris Weston of Pepperstone wrote in a note to customers. “But diving is clearly accepted.”
– With the assistance of Matthew Burgess and Haidi Lun