Bitcoin below US$50,000 as caution offsets rally

Bitcoin yesterday slid after a bout of volatility highlighted lingering doubts about the durability of its mesmerizing rally.

The cryptocurrency fell as much as 12.5 percent to US$48,071 and was trading below US$50,000 as of 8:16am in London. At one point on Monday it plunged 17 percent before paring the slide. Bitcoin is still up about 390 percent in the past year.

US Secretary of the Treasury Janet Yellen and Microsoft Corp cofounder Bill Gates were the latest to weigh into a debate over the digital coin.

Photo: Reuters

Gates cautioned about how investors can be swept up in manias, while Yellen said bitcoin is a very “inefficient” way of conducting transactions.

In the background are jitters that the global economic recovery from the COVID-19 pandemic would eventually prompt central banks to dial back easy-money policies that helped propel bitcoin higher.

At a technical level, the digital currency looks stretched, Miller Tabak and Co has said.

A monthly relative strength index for bitcoin is “extremely overbought,” the company’s chief market strategist Matt Maley wrote in a note over the weekend.

Gates and Yellen muscled in on a discussion that of late had been dominated by Tesla Inc chief executive officer Elon Musk. He has tweeted that bitcoin prices “seem high,” but also that the token is a “less dumb” version of cash.

Bitcoin faithful argue that the digital currency is a hedge for risks such as faster inflation and is winning more attention from corporate treasurers and long-term investors. Others see echoes of the digital coin’s 2017 boom and bust.

“It’s a pure speculative asset,” said Nader Naeimi, head of dynamic markets at AMP Capital Investors in Sydney.

The Bloomberg Galaxy Crypto Index, which spans bitcoin, ether and three other digital tokens, declined as much as 13 percent.

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