Bitcoin dive seen as short-term pullback

Thursday, November 26, 2020

Bitcoin and other digital currencies plunged today, a slide likely to stoke speculation about the durability of the boom in cryptocurrencies, Bloomberg reports.

Bitcoin slumped by 8.7 percent, the most since early August, while digital coins like Ether also tumbled. The Bloomberg Galaxy Crypto Index at one point slid by more than 6 percent.

Even with the retreat, Bitcoin has more than doubled this year and until recently was knocking on the door of the record high of US$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 US dollar weakness amid the pandemic, as reasons why the boom can last.

Skeptics argue the cryptocurrency’s famed volatility portends a repeat of what happened three years ago, when a bubble burst spectacularly. Some see signs of retail investors piling in to chase momentum for fast gains, storing up an inevitable reckoning.

Bitcoin fell by 5.4 percent as of 3:07 p.m. in Tokyo to about US$17,856, while Ether was more than 8 percent lower at about US$528.

Concern about the possibility of tighter U.S. crypto rules, as well as profit taking, help explain today’s price drop across most major digital assets, said Ryan Rabaglia, global head of trading at OSL brokerage in Hong Kong.

“It’s also not unusual to see a short-term pullback following periods of significant, accelerated gains as traders look to take profits before resetting once volatility subsides,” he said. “Once the dust settles, we’re back to business as usual with all medium to long-term bullish indicators still in play.”