Last week, Elon Musk‘s embrace of Bitcoin rocketed the cryptocurrency 20% higher to over US$58,000. This weekend’s cold shoulder has it in freefall.
In New York, Bitcoin plummeted more than 16% and back below $50,000, giving up more than $8,000 in a matter of hours after the richest man in the world tweeted his fear that the price had risen too high too fast.
This month, fuelled by purchases from Tesla Inc. and institutional investors who claim Bitcoin is an enticing alternative to gold and the dollar, the world’s largest cryptocurrency has been on the rising.
Bitcoin is up more than 60 percent in February alone, causing commentary that the run-up is unsustainable. On Sunday, the digital token reached a new all-time high and came close to exceeding US$59.00
Volatile weekend swings are commonly believed to be powered by individuals who trade the cryptocurrency at home. Thus, as institutional crypto traders who observe regular business hours replied to Musk’s Saturday tweet that Bitcoin prices “seem high,” it is also likely that prices drop on Monday.
“Mostly, combined with Elon Musk saying it looks a bit overdone, it is down to a massively long speculative market,” said Jeffrey Halley, senior analyst at Oanda Corp.
Meanwhile, strategists at JPMorgan Chase & Co. have cautioned about the deteriorating liquidity in Bitcoin. “In a note on Friday, strategist Nikolaos Panigirtzoglou wrote that liquidity for the digital coin was lower than for the S&P 500 Index and gold, meaning that, he wrote, “even small flows can have a significant price effect.
According to Neil Wilson, chief analyst at Markets.com, “It should go without saying that Bitcoin’s new investors should be prepared for significant volatility and for prices to fall suddenly and as sharply as they have risen.”