The week is off to a bearish start for cryptocurrency as the price of Bitcoin fell nearly $10,000 from its Friday high of nearly $42,000, temporarily ending an unprecedented rally.

On Monday morning, Bitcoin was trading under $33,000—a more than 20% drop from its recent high—while some other cryptocurrencies fell even further.

The fall in crypto value comes amid a broader retreat on Monday for stocks, and a resurgence in the U.S. dollar.

While Bitcoin’s latest price tumble is dramatic in percentage terms, it is well shy of the wipeout that occurred last spring at the outset of the pandemic. In March, the digital currency fell nearly 60% to a low of around $3,800.

This week’s price collapse is also just the latest in Bitcoin’s long history of crashes, which have defined the currency since it launched in 2009. Other notable setbacks include a fall from $29 to $2 in 2011, and the popping of the 2017 bubble, which saw Bitcoin bottom out near $3000 after hitting a then-record high of nearly $20,000.

The current price retreat does not appear tied to a specific event, but rather appears to be a combination of profit-taking and simple financial gravity. Bitcoin first broke $20,000 in December and has since been on a dizzying run that saw it eclipse $40,000 last week.

All of this led Bank of America to speculate that the current Bitcoin run is “the mother of all bubbles.” Other voices of caution include the UK financial regulator, FCA, which issued an unusual warning on crypto investments that noted, “If consumers invest in these types of product, they should be prepared to lose all their money.”

The FCA warning did not appear directed at Bitcoin, but rather at the broader cryptocurrency environment, which has long been marred by fly-by-night companies and outright scams.

This week’s price collapse also appears to have had a knock-on effect on public companies with exposure to crypto prices. These include Riot Blockchain, which builds software for crypto firms, and security firm Microstrategy, which has bought hundreds of millions of dollars worth of Bitcoin for its corporate treasury. Shares of the two firms were down over 20% and 10%, respectively, on Monday.

The news is not all bad for crypto fans. Last week, JP Morgan predicted the price of Bitcoin could hit $146,000 as more big firms embrace it as an alternative to gold. Meanwhile, longtime bulls—some of whom have likened Bitcoin to the indestructible honey badger—are likely to regard the current price swoon as an inevitable correction rather than an existential threat.

More must-read finance coverage from Fortune:



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *