Bitcoin slumps, slamming the brakes on its New Year rally

Bitcoin

Bitcoin fell sharply on Monday, losing earth by a record high of $34,800 touched a day before, with traders citing volatility in highly regulated futures markets.

Bitcoin dropped more than 14% after earlier touching as large as $33,670, wiping out over half of its own 20% rally in New Year’s Eve to a record $34,800 on Sunday.

Bitcoin was last down 8 percent at $30,542.

A working cryptocurrency derivatives market has grown since 2017, together with foreign exchanges nevertheless offering trading. Moves in these markets may have an outsized effect on bitcoin’s price.

Bitcoin’s record high came less than three weeks after it crossed $20,000 for the first time, on December the 16th. The world’s largest cryptocurrency over quadrupled in price this past year.

Dealers said bitcoin’s drop on Monday was not unusual for the volatile asset, whose wild price swings have in part prevented it from becoming widely used as a currency.

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“It’s still an unavoidably volatile asset by its nature,” explained Joseph Edwards of crypto brokerage Enigma Securities.

Smaller coins which frequently proceed in tandem with bitcoin also fell, though not as sharply. Ethereum, the second biggest, dropped 1% after touching a 3-year high of $1,170.

Fuelling bitcoin’s rally has been the perception it can function as a hedge against the risk of inflation as governments and central banks turn on the stimulation taps to counter the financial effect of the COVID-19 pandemic.

“Some of it is reflecting the fear of a weaker dollar,” Bank of Singapore currency analyst Moh Siong Sim stated of its most recent rally.

However, gold climbed 2%, underlining bitcoin’s patchy correlation with all the traditional inflation hedge.

Bitcoin’s advance has also reflected expectations it will become a mainstream payment approach. Its potential for fast profits has also attracted need from bigger U.S. investors.

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The team at Platform Executive hope you have enjoyed this news article. Initial reporting via our official content partners at Thomson Reuters. Reporting by Tom Wilson in London and Kevin Buckland In Tokyo. Additional reporting by Tom Westbrook and Alun John. Editing by Kenneth Maxwell, Raju Gopalakrishnan, Bernadette Baum and Alex Richardson.

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