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Bitcoin plunged 17% on Monday, to less than $ 48,000.
The drop comes a day after the cryptocurrency hit a new high of $ 58,042 on Sunday, with a gain of more than 100% over the year. The cryptocurrency on Friday reached a market capitalization of $ 1 trillion for the first time.
Monday’s fall is a sign of caution about the rapid rise of the cryptocurrency. Bears have long said that bitcoin is in bubble territory, comparing the recent spike to what happened in 2017, when bitcoin plunged 45% just after reaching new highs.
Will Hobbs, the CIO at Barclays Wealth & Investments, told Insider that he was running away from cryptocurrency due to its violent swings, a view shared by many money managers.
Meanwhile, in recent weeks, bitcoin has gained additional institutional support, from Tesla to Mastercard, among others.
MicroStrategy, the first corporation to buy bitcoin directly, now owns 70,784 bitcoin, with an approximate value of $ 3.5 billion. The chief executive of the enterprise software company, Michael Saylor, has long advocated bitcoin, viewing cryptocurrency as a hedge against a possible devaluation of the U.S. dollar.
On Sunday, Saylor fired a tweet to his half million followers: “It’s just speculation if you don’t understand the technology or why you need it. #Bitcoin“
As for Tesla, a stock analyst at Wedbush Securities estimates that the electric car maker has accumulated $ 1 billion in profits from its $ 1.5 billion bitcoin investment.
“Based on our calculations, we estimate that Tesla has so far made about $ 1 billion in profit in the last month from its investment in Bitcoin, given the skyrocketing price of Bitcoin, which now reaches a trillion market value,” wrote analyst Dan Ives in a note published Saturday.
Tesla’s CEO, Elon Musk, has been a vocal supporter of cryptocurrency, most recently saying it is “a less stupid form of liquidity than money”. On Saturday, however, Musk admitted that the price of bitcoin “looks high”.
Many believe the cryptocurrency’s skyrocketing high in recent weeks may have been motivated by two things: buyers looking to protect themselves from inflation or simply by individuals trading the cryptocurrency.
Still, some bitcoin bulls have told Insider that they expect the cryptocurrency to rise further, reaching $ 250,000 over the next three years.
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