Bitcoin fell over 14 percent after earlier touching as high as $33,670 (roughly Rs. 24.6 lakhs), wiping out more than half its 20 percent rally from New Year’s Eve to a record $34,800 (roughly Rs. 25.4 lakhs) on Sunday.
Bitcoin was last down 9 percent at $30,077 (roughly Rs. 21.9 lakhs).
A functioning cryptocurrency derivatives market has developed since 2017, with offshore exchanges still offering highly leveraged trading. Moves in such markets can have an outsized effect on Bitcoin’s price.
“It’s the unwinding of some of that leverage,” said Richard Galvin of crypto fund Digital Asset Capital Management.
Bitcoin’s record high came less than three weeks after it crossed $20,000 (roughly Rs. 14.6 lakhs) for the first time, on December 16. The world’s biggest cryptocurrency more than quadrupled in price last year.
Traders said Bitcoin’s drop on Monday was not unusual for the volatile asset, whose wild price swings have in part prevented it from becoming widely used as a currency.
“It’s still an unavoidably volatile asset by its nature,” said Joseph Edwards of crypto brokerage Enigma Securities.
“For the most part, this looks like a purely technical move, signalled and caused by short-term euphoria,” he added.
Fuelling Bitcoin’s rally has been the perception it can act as a hedge against the risk of inflation as governments and central banks turn on the stimulus taps to counter the economic impact of the COVID-19 pandemic.
“Some of it is reflecting the fear of a weaker dollar,” Bank of Singapore currency analyst Moh Siong Sim said of its most recent rally.
Bitcoin’s advance has also reflected expectations it will become a mainstream payment method. Its potential for quick gains has also attracted demand from larger US investors.
© Thomson Reuters 2020
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