Bitcoin and other digital currencies plunged Thursday, a slide likely to stoke speculation about the durability of the boom in cryptocurrencies.
Bitcoin slumped as much as 8.7%, the most since early August, while digital coins like Ether also tumbled. The Bloomberg Galaxy Crypto Index at one point slid more than 6%.
“Conditions are very massively overbought and bound for a correction,” said Vijay Ayyar, head of business development with crypto exchange Luno in Singapore. “So I don’t think it’s unusual frankly.”
Even with the retreat, Bitcoin has more than doubled this year and until recently was knocking on the door of the record high of $19 511 set in 2017. Crypto believers tout purchases by retail investors, institutions and even billionaires, as well as the search for a hedge against dollar weakness amid the pandemic, as reasons why the boom can last.
Concern about the possibility of tighter US crypto rules, as well as profit taking, help explain Thursday’s price drop across most major digital assets, said Ryan Rabaglia, global head of trading at OSL brokerage in Hong Kong.
Just this week, Van Eck Associates launched a Bitcoin exchange-traded note on the Deutsche Boerse Xetra exchange. In October, PayPal Holdings Inc. said it would allow its customers access to cryptocurrencies.
There is also a buzz around Ethereum, the most-actively used blockchain in the world, which is set for a network upgrade that would allow it to process a similar number of transactions as Mastercard and Visa. The shift to the new system could curb the total supply of Ether, whose price has quadrupled so far this year.
Luno’s Ayyar said he expects Bitcoin to stabilize and achieve all-time highs. But that would be followed by a larger drop in the cryptocurrency, he said.