- Bitcoin fell over 10% on Thursday as cryptocurrency traders cashed in on their Bitcoin holdings that have gained 20% in value this month alone.
- The digital token looked set to hit a record high of $US20,000 this week.
- After such a swift rally, traders said a number of large investors booked profits on their holdings â€” many of which may have been moved to exchanges to secure a better price.
- “It feels more and more like we’re hitting a Bitcoin tipping point,” a crypto trader said. “In fact, a cool-down is to be expected.”
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Bitcoin slid by more than $US2,000 on Thursday in its biggest one-day drop in nearly three months.
The price of the world’s largest cryptocurrency fell 11%, to $US16,725, as of 8:45 a.m. GMT. The price is still up by around 21% this month and by 138% on the year. On Wednesday, it hit a peak of $US19,497, but did not break the $US19,666 record set in December 2017.
The price correction may also be a function of a number of crypto traders moving larger volumes of Bitcoin to exchanges, where they can be more easily sold at a better price, when the token approached the $US20,000 mark.
“It feels more and more like we’re hitting a Bitcoin tipping point,” said John Kramer, trader at crypto trading firm GSR. “In fact, a cooldown is to be expected. But with more well-known fund managers and institutions re-examining their Bitcoin theses every day, it’s getting harder to not take the asset more seriously.”
Kramer said many investors feel the stock market is utterly divorced from economic reality right now. The S&P 500 hit record highs this week as US COVID-19 cases surged and almost 2,000 Americans were dying every day from the virus. Prospective returns from traditional markets are low, while the risks are quite high, he said.
Part of the rally in cryptocurrencies in the past few weeks has stemmed from them having very little correlation to the wider economy, interest rates or even other asset classes, unlike equities, bonds, gold or oil.
“The stimulus response to the pandemic has stoked lingering concerns among several large asset managers about the devaluation of the US dollar, shining a light on Bitcoin’s finite supply,” Kramer said. “The risk-return relationship for digital assets is now uniquely poised as an attractive alternative that is uncorrelated to wider macro and increases the diversification of a traditional portfolio.”
Despite the sell-off on Thursday, Bitcoin may soon hit $US20,000, according to Ki-Young Ju, creator of on-chain analytics firm CryptoQuant.
“All Exchanges Inflow Mean increased a few hours ago,” Ki-Young said in a tweet. “It indicates that whales, relatively speaking, deposited $BTC to exchanges. But long-term on-chain indicators say the buying pressure prevails. I still think we can break 20k in a few days.”
Other digital coins also tumbled alongside Bitcoin. Ethereum fell more than 13%, to about $US491, and Ripple’s XRP fell 20%, to $US0.49. Smaller “altcoins” have benefitted from the same push into cryptocurrencies. Ethereum is still up by around 30% this month, while XRP has more than doubled in value.
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