On Thursday, Bitcoin has fallen for a second consecutive day to slip below its 10-day moving average. The cryptocurrency’s torrid rally has lost some steam this week as according to price data consolidated by Bloomberg, it is down as much as 8.4% over a two-day downfall and was trading at $34,546 as of 11:50 a.m. in Hong Kong on 21 January.
The second-largest digital asset, Ether, which is built on the open-source Ethereum blockchain, hit an all-time high of $1,448 on Tuesday. However, on Thursday, it is holding at about $1,330. On Wednesday, other prominent cryptocurrencies such as tether, ripple, and stellar traded 0.18%, 7%, and 6% lower, respectively.
Bitcoin touched a record of almost $42,000 earlier this month before quickly dropping about 17% while debate continues to rage over Bitcoin’s perceived value. Believers point out towards a maturing industry and institutional interest in the cryptocurrency as an inflation hedge while people opposing it see the return of another speculative bubble echoing its 2017 collapse.
Investors who have kept a close eye on Bitcoins would recollect that a similar rally in 2017 was followed by a huge crash. In 2017, Bitcoin rallied from the low of around $790 to a peak of $1,9041 in December, however, in 2018, it crashed by 74%.
Even now, especially considering the sudden spike in volatility and increasing institutional participation, many experts have been warning of a bubble building up in Bitcoins.
“Most cryptocurrencies are notoriously volatile and the increase in institutional participation may be making things worse. While demand would increase and volatility ease should corporations hold Bitcoin for business purposes, the opposite is true when institutions gain exposure for speculative purposes. Empirical evidence from other asset classes suggests that higher participation by institutional investors could increase volatility because of their more opportunistic investment approach,” Michael Bolliger, chief investment officer, global emerging markets, UBS Switzerland AG said in a report on 14 January, according to LiveMint.
Bitcoin has fallen below its 10-day moving average for a third time this month after struggling to maintain its momentum from the end of 2020. The world’s first and largest cryptocurrency is also on track for a second straight weekly decline, the last time this happened was during the start of October.