19% drop from Friday’s historic high
Bitcoin’s price fell the biggest drop since March 2020 on Monday, intensifying concerns that the rally in recent months is unsustainable.
On Monday afternoon the Bitcoin’s exchange rate fell 19% to $30,699, before recovering a little later to $32,675.
Reuters links bitcoin’s fall over the past two days to the dollar’s recovery due to the prospect of an interest rate hike in the US.
The fall in the dollar had fueled Bitcoin’s upward rally coupled with the idea that the cryptocurrency is resilient to the inflationary pressures brought about by economic recovery programs after the pandemic crisis.
Thanks to increased interest from institutional investors and from people using bitcoin to buy hosting services among other services, Bitcoin doubled its value compared to early December and reached a historic high of $42,000 on Friday, leading some investment banks to warn of a bubble.
Last week Bank of America warned that Bitcoin is outpacing the dot-com bubble in the late 1990s, China in the 2000s, and gold in the 1970s.
On the other hand, jp morgan analysts estimated last week that Bitcoin has the potential to soar to $146,000 once the big fluctuations stop and the cryptocurrency is recognized as a safe investment in the gold position.
A Correction or a Bursting Bubble?
In the past 24 hours, the cryptocurrency has fallen by more than $8,000 to $32,400, a drop of more than 20%, vindicating recent statements by Bank of America Chief Investment Officer Michael Hartnett that has characterized the rise in recent days as “Mother of all bubbles”.
Bitcoin last moved slightly close to $35,380 with a record for some hours at $41,962 on January 8.
It is unclear whether sales on the part of miners (developers who produce it) or those who have long been positioned to reap the benefits of the crazy rise of the last period have influenced the course of the currency.
It is a fact, however, that last week huge quantities of cryptocurrencies were transferred from some of the best cryptocurrency wallets to exchanges.
Data provided by South Korea-based analysis firm CryptoQuant show that sales on the miners’ side contributed to the price drop. The 30-day average of the miners’ position index (MPI) proves this, followed by panic sales mainly on the US-based Coinbase exchange.
An order to sell 180 bitcoin on Coinbase quickly lowered the price by $1,200, as the cryptocurrency expert noted @lightcrypto which also shows how volatile this market is.
Oil on fire also fired a comment by CIO Scott Minerd of Guggenheim Partners on Twitter that wrote that “the sharp rise of bitcoin is “unsustainable” and that the currency is vulnerable to a fall with the technical target of $35,000 achieved is time to withdraw some money”.
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