After rising more than 300% last year and hitting a new high last week, getting close to $42,000 and doubling its price in less than one month, bitcoin plunged this Monday (Jan 11) more than 17% in 24 hours.
This is the worst bitcoin crash since last March.
The sell-off combined erased about $200 billion from the cryptocurrency market in just 24 hours.
Some in the market believe a cryptocurrency bubble is about to burst.
Britain’s Financial Conduct Authority, UK’s financial watchdog, published a striking statement this Monday, highlighting digital currencies risks. “Investing in crypto-assets, or investments and lending linked to them generally involves taking very high risks with investors’ money. If consumers invest in these types of product, they should be prepared to lose all their money”, it says.
Regulators stressed that there is no guarantee that crypto-assets can be converted back into cash in case of lack of demand.
Even those who were recently bullish on bitcoin are pushing the gears now.
“Bitcoin’s parabolic rise is unsustainable in the near term. Vulnerable to a setback. The target technical upside of $35,000 has been exceeded. Time to take some money off the table,” posted on Twitter Scott Minerd, a chief investment officer with Guggenheim Investments. In late December, Minerd predicted Bitcoin could eventually reach $400,000.
Bitcoin’s advocates say the current rally is different from the last one, in 2017 when it was driven by new interest from investors in Asia looking for short term gains.
They argue now investors in general, including companies in the asset management industry, look at bitcoin as an alternative investment for the long term, like gold. They also call it digital gold.
But there are rising concerns in Wall Street that bitcoin’s price is being driven by pure speculation, not real demand for its use as a currency.
In the 2017 crash, bitcoin’s price dropped almost $20,000 to below $4,000 from late 2017 to early 2019.