Bitcoin slumps 14% after weekend surge

Bitcoin plummeted 14 per cent to $27,805 on Monday after a meteoric rally that saw it soaring past $34,000 on Sunday.

The world’s most popular cryptocurrency surged over $30,000 for the first time on Saturday, touched a record high of $34,800 a day later, as investors continued to bet the digital currency was on its way to becoming a mainstream asset.

The latest milestone for the world’s most popular cryptocurrency came less than three weeks after it crossed $20,000 for the first time, on December 16, and Bitcoin has now surged some 800 per cent since mid-March.

With Bitcoin’s supply capped at 21 million, some see it as a hedge against the risk of inflation as governments and central banks turn on the stimulus taps in response to the Covid-19 pandemic. Some also view it as a safe-haven play during the Covid-19 pandemic, akin to gold.

David Rosenberg, a long-time market bear and Rosenberg Research president, has warned investors that Bitcoin, which had its best annual performance since 2017, “is the biggest market bubble.”

“The parabolic move in bitcoin in such a short time period, I would say for any security, is highly abnormal,” said Rosenberg, who considers it,”

The economist and strategist said gold, which just completed its best year in a decade is a safe haven asset. “The yellow metal has 1/5 of the volatility that Bitcoin does. I’ve been very bullish on gold, and I remain bullish on gold,” Rosenberg said.

Dr Nouriel Roubini, a professor of economics at New York University’s Stern School of Business, who is one of the world’s biggest crypto critics, has repeatedly warned that the “cryptocurrency as a technology has absolutely no basis for success,” despite admitting that BTC “maybe is a partial store of value” in late 2019.

Other adversaries of the digital currency include Peter Schiff, a millionaire broker and CEO at Euro Pacific Capital. Over the course of 2020, Schiff delivered multiple negative and controversial remarks about Bitcoin, predicting that gold will moon while Bitcoin will crash in the near future.

Bank of Singapore currency analyst Moh Siong Sim said of Bitcoin’s most recent rally that it reflected the fear of a weaker dollar,”

“It seems like people are preferring bitcoin as an expression of concern over currency debasement, relative to gold.”

Bitcoin’s advance also reflects increasing expectations it will become a mainstream payment method, with PayPal opening its network to cryptocurrencies.

The potential for quick gains has also attracted demand from larger US investors, as well as from traders who normally stick to equities.

“The rally gained even more momentum as insatiable investors continued trading from home” during the New Year holidays, said Dave Chapman, executive director at Hong Kong based digital asset company BC Group.

Institutional investors see the potential for greater risk-adjusted returns compared to traditional investments, he said.

Bitcoin trades on numerous exchanges, one of the largest of which is Coinbase, itself preparing to go public to become the first major US cryptocurrency exchange to list on Wall Street.

Multiple competitor cryptocurrencies use similar blockchain, or electronic ledger, technology. Ethereum, the second biggest, shot to a record $1,014 on Sunday.

— issacjohn@khaleejtimes.com