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The Bitcoin wild ride we witnessed in the closing months of 2020 shows no signs of stopping as we enter the second week of the new year. On Monday, Bitcoin, along with some other major cryptocurrencies, experienced a significant drop. The most popular digital coin decreased in value by 11%. It adds up to the worst two-day drop since way back in March as a 21% tumble raised questions about Bitcoin losing steam gathered in the past two months. It’s the worst slide in the span of two days since the Covid-19 pandemic started and it comes after a record high nearing $42.000 on January 8th.
The movements seen on Monday resulted in $170 billion being wiped off the global cryptocurrency market. The overall market capitalization was at $959.53 early on Monday, a steep decline from the crypto market’s value the day before, which capped at $1.1 trillion. During the same period, the leading digital currency, Bitcoin, fell from $35,828.06 to $33,549.79 triggering the drop of other virtual coins, most notably Ether which slid nearly 20%.
If we look at the Bitcoin movement over the last 12 months, it’s still up by over 340% and Monday’s sell-off may be a sign of some major investors deciding to cash in on some of their positions and take the profit after BTC hit the record of almost $42.000 last week. The executive director of investment and trading and one of the leading crypto finance firms Babel Finance, Simons Chen, noted that the correction we saw was expected and that Bitcoin performance in the last two months and almost doubling in value will result in some pressure to sell.
Over the last few weeks, Bitcoin’s surge has been propelled, among other things, by a strong backing it received from some major Wall Street players. The end of 2020 marked the first time the institutional investors decided to go in aggressive on the Bitcoin positions. The largest and the most popular cryptocurrency has been frequently likened to gold and viewed as a potential hedge against the inflation that we are likely to experience in the upcoming months.
Just last week, strategists at JPMorgan estimated that Bitcoin could become a long-term competitor to gold and realistically reach the value of $146.000 in the long haul. However, they added that the necessary prerequisite for this to happen is the significant decrease in cryptocurrency’s volatility.
On the other hand, Bitcoin critics also made their voices heard in the last couple of weeks. Long-time bear David Rosenberg from Rosenberg Research warned that Bitcoin is, in fact, a massive bubble and described the performance over the last 12 months as “highly abnormal”.
Chu feels that the short-term correction we are currently witnessing is a great entry-point for those looking for long-term investments, predicting the value may soar up to $100k by the year’s end. Joining him in bullish prediction is Chamath Palihapitiya from Social Capital who recently told CNBC that Bitcoin could easily go up to $200.000 in five or ten years.
• Source: $150 billion wiped off cryptocurrency market in 24 hours as bitcoin pulls back from CNBC.com On January 11, 2020.