Dado Ruvic/Reuters
- The Bitcoin price recovered on Tuesday to around $36,000 after sliding to just over $30,000 on Monday, as cryptocurrency volatility continued.
- Superstar investor Mark Cuban said in a tweet the more than 340% rise in price in the last year is ‘EXACTLY like the internet stock bubble’ of the 1990s.
- Yet Cuban said Bitcoin and Ethereum could ride out the bubble bursting and thrive in the future. Other analysts – such as those at UBS – were more skeptical.
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The Bitcoin price recovered back to around $36,000 on Tuesday, as the cryptocurrency market recovered from Monday’s plunge, but volatility remains high and superstar investor Mark Cuban warned the recent rise is a “bubble” that could be ruinous.
Bitcoin fell as much as 20% on Sunday and Monday to just above $30,000 in a wave of profit-taking after the currency’s spectacular rally. Investor nerves and a higher dollar also hit crypto-confidence.
Yet the Bitcoin price rose sharply on Monday evening and Tuesday morning, climbing more than 15% from Monday’s low and breaching the $36,000 mark once again. It then slipped back slightly to $35,715 at 4.23am ET.
The cryptocurrency has risen more than 13% in just a week, 92% in a month and around 340% in a year, after markets were flooded with money by central banks during the coronavirus crisis.
The remarkeable rise in cryptocurrencies has attracted attention from all corners of the markets. Yesterday, Cuban warned on Twitter that the “cryptos trade” is “EXACTLY like the internet stock bubble” seen in the late 1990s, which burst with disastrous consequences for many companies and investors.
Yet he said that Bitcoin, Etheruem and “a few others” could survive and “thrive”, as companies like Amazon and eBay did two decades ago.
Ethereum was up on Tuesday morning to $1,111. It was trading close to the all-time high of more than $1,200 seen in early 2018, and has risen around 675% in the last year.
Watching the cryptos trade, it’s EXACTLY like the internet stock bubble. EXACTLY. I think btc, eth , a few others will be analogous to those that were built during the dot-com era, survived the bubble bursting and thrived, like AMZN, EBay, and Priceline. Many won’t
– Mark Cuban (@mcuban) January 11, 2021
Cuban warned against trusting crypto evangelists who “try to justify whatever the pricing of the day is”.
“All the narratives about debasement, fiat, etc are just sales pitches. The biggest sales pitch is scarcity vs demand. That’s it,” he said in a tweet.
But Bitcoin enthusiasts say this time is different, and argue that a price crash like the one seen in 2018, which saw the price hit a then-record around $19,900 only to plummet to around $5,870 in eight weeks, is unlikely.
Michael Hall, co-founder of Nickel Digital Asset Management, said Bitcoin “is experiencing upside volatility which may correct sharply but tends to resolve reasonably quickly at higher levels as price discovery continues.
“We do not believe there has been any fundamental change in the outlook for Bitcoin which is now increasingly owned by longer-term investors, weighted towards Europe and North America, looking to buy and hold within multi-asset portfolios.”
However, UBS analysts took a dimmer view. They said in a note: “Given their high volatility and the size of their past drawdowns, cryptocurrencies might be attractive to speculative investors, but they are neither a suitable alternative to safe-haven assets, nor do they necessarily contribute to portfolio diversification.”
The UK’s Financial Conduct Authority yesterday said: “If consumers invest in these types of product, they should be prepared to lose all their money.”
“Significant price volatility in cryptoassets, combined with the inherent difficulties of valuing cryptoassets reliably, places consumers at a high risk of losses,” it added.
