Bitcoin Plunges 13% After Massive New Year’s Rally

Topline

Bitcoin prices plunged 13% Monday morning after hitting a record high of $34,000 on Sunday.

Key Facts

The cryptocurrency fell 13% in the early hours of Monday morning from about $33,000 to levels around $28,700 but is steadily recovering some of those losses. 

The popular cryptocurrency more than quadrupled in value in 2020, with its price rising from about $7,000 per bitcoin at the beginning of 2020 to more than $29,000 by the end of December.

The rally continued into the new year, with prices rising even further to a record high of more than $34,000.

Some experts have attributed those massive gains to an investor appetite for a long-term hedge against inflation (bitcoin’s value is not controlled by any central bank), especially in the wake of massive global stimulus spending during the coronavirus crisis.

PwC’s global crypto leader Henri Arslanian told CNBC Monday that bitcoin’s big gains in recent months can also be attributed in part to larger, institutional players entering the market.

Crucial Quote

“It’s still an unavoidably volatile asset by its nature,” Enigma Securities’ Joseph Edwards told Reuters. “For the most part, this looks like a purely technical move, signalled and caused by short-term euphoria,” he added.

Key Background

As bitcoin broke records in 2020, Wall Street leaders took notice but remained skeptical that the cryptocurrency could become a popular holding for major financial institutions, despite the rush of individual investors piling into the asset. Hedge fund billionaire Ray Dalio said in November that bitcoin is “not very good” as a medium of exchange or a store of wealth because of its volatility.

Further Reading

As Bitcoin Surges 15%, Here’s What Wall Street’s Saying About The Cryptocurrency’s Meteoric Resurgence (Forbes)

Bitcoin Hits New All-Time High Of $19,850 Nearly Three Years After Crypto Crash (Forbes)

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