A bitcoin illustration on euro banknotes.
Nicolas Economou | NurPhoto via Getty Images
Bitcoin is retreating from its records. The cryptocurrency fell briefly to less than $ 30,000 on Monday, just two days after breaking that level for the first time.
Bitcoin’s price reached a new record over the weekend, surpassing the $ 34,000 mark. This change was followed by an increase in smaller cryptocurrencies, such as ether, which surpassed the $ 1,000 mark for the first time since February 2018.
Bitcoin fell to $ 29,316 around 5:40 am (GMT) on Monday, down 12% in the past 24 hours. It soon rose again above the $ 30,000 level, but was still below 10%.
“The most likely explanation for a downturn is short-term profits from traders rather than long-term investors,” Jason Deane, an analyst at crypto consulting firm Quantum Economics, told CNBC via 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 capitalization, saw a historic high in 2020, advancing more than 300%. Created in 2009, it is seen by advocates as a decentralized digital currency that dispenses with any central authority, such as a central bank.
Today, crypto bulls hail bitcoin as a hedge against gold-like inflation in the face of unprecedented government stimulus aimed at fighting the coronavirus pandemic. Several institutional investors have shown growing interest in bitcoin, allocating a portion of their assets to invest in digital currency.
“There is no denying that bitcoin has proven to be an established and high-performing asset,” said Eric Demuth, CEO of digital assets broker Bitpanda. “Bitcoin’s value grew by more than 300% last year, as more institutional investors took the leap to embrace digital currencies.”
“We are seeing this emerge as part of the recommended allocation strategy for institutional investors and investment banks.”
Known investors like Paul Tudor Jones and Stanley Druckenmiller declared themselves to be bitcoin believers last year, while major financial companies like PayPal and Fidelity also made moves in space. Meanwhile, companies like Square and MicroStrategy 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 burst at some point.
Bitcoin’s performance in 2020 was reminiscent of its frantic rise to nearly $ 20,000 in 2017, which was followed by a sharp drop the following year. However, crypto fans say the recent rally is different from 2017, as it was driven by institutional demand rather than retail speculation.