An illustration of bitcoins in euro banknotes.
Nicolas Economou | NurPhoto via Getty Images
Bitcoin pulls out of its record highs. The cryptocurrency fell briefly below $ 30,000 on Monday, just two days after failing to break that level for the first time.
The price of bitcoin rose to an all-time high over the weekend, topping $ 34,000. This move was followed by a rise in smaller cryptocurrencies, such as ether, which topped the $ 1,000 mark for the first time since February 2018.
Bitcoin fell to $ 29,316 around 5:40 a.m. Monday, 12% less in the last 24 hours. It soon surpassed the $ 30,000 level again, but still fell above 10%.
“The most likely explanation for a setback is the short-term profit-taking by traders, rather than long-term investors,” Jason Deane, an analyst at cryptocurrency advisory firm Quantum Economics, said in an email. . “Given the current sentiment and appetite for Bitcoin, it seems likely that any correction will be short-lived.”
Bitcoin, the world’s largest cryptocurrency by market value, had a historic upswing in 2020, advancing more than 300%. Created in 2009, proponents see it as a decentralized digital currency that renounces the need for any central authority, such as a central bank.
Today, cryptocurrencies view Bitcoin as a gold-like inflation hedge in the face of an unprecedented government stimulus aimed at combating the coronavirus pandemic. Several institutional investors have shown a growing interest in bitcoin, allocating a portion of their assets to investing in digital currency.
“There is no denying that Bitcoin has proven to be a well-established asset with the best performance,” said Eric Demuth, CEO of digital asset broker Bitpanda. “The value of Bitcoin grew more than 300% last year as more institutional investors made that leap to embrace digital currencies.”
“We are seeing it emerge as part of the recommended allocation strategy for institutional investors and investment banks.”
Well-known investors like Paul Tudor Jones and Stanley Druckenmiller came out believing in bitcoin last year, while big financial companies like PayPal and Fidelity have also made moves in space. Meanwhile, Square and MicroStrategy have used their own balance sheets to buy bitcoin.
Still, skeptics see bitcoin as a speculative asset with no intrinsic value and a market bubble that is likely to explode at some point.
Bitcoin’s 2020 performance was reminiscent of its frantic rally to nearly $ 20,000 in 2017, which was followed by a sharp setback the following year. However, cryptography enthusiasts claim that the recent concentration is different from that of 2017, as it has been driven by institutional demand rather than retail speculation.