Bitcoin Price Falters Once Again, What’s Next?
Bitcoin (BTC) price fell further downward during the past week touching lows of $45,000 for the first time in February. After an all-time high recorded at $58,000 just last week, the world’s biggest cryptocurrency fell into the $45,000’s having recorded a 20% crash on Monday. At the time of writing, some momentum had gathered at above $46,000, but the bigger trajectory remains largely unclear and volatile.
The decline comes as a surprise to even the most assertive crypto bulls, as it was expected that BTC will continue to gather momentum after February breakthroughs saw renowned vehicle and green energy company Tesla invest $1.5 billion in the cryptocurrency and its market value topping $1 trillion on February 20th. It is now believed that it was Tesla’s and Mastercard’s warming up to Bitcoin, that caused the stir in prices. After these big-name investments in BTC, futures traders were borrowing excessive amount of money to buy Bitcoin contracts, causing rates to skyrocket. Other digital tokens; Ethereum, XRP and Dogecoin have also followed BTC to both soar and slip over the past few weeks.
Bitcoin’s turn in fortunes for the worse have been attributed to Tesla’s CEO Elon Musk’s statement on Twitter, saying Bitcoin and Ether prices “seem high”. Since these comments, not only has crypto plummeted, but Tesla’s shares have also suffered, tumbling 10.5% over the past week. Such feeble volatility has given all the more voice to crypto skeptics who believe BTC is almost always bone-dried, relying on a spark, which came about in the form of Elon Musk this time around. Nader Naeimi, head of dynamic markets at AMP Capital Investors claimed that Bitcoin is a “pure speculative asset”.
The peculiar rise and fall in Bitcoin price over the month of February has typified the old debate between crypto proponents and skeptics. After crossing $50,000 in price earlier this month, bullish investors have begun to believe that Bitcoin can successfully sustain as a store of value against gold and make a good bank account, as it is uncorrelated with other asset prices. It is also believed that the cryptocurrency can form resistance as a hedge against ever-rising global inflation. However, the sudden, sharp decline has let skeptics warn that the currency has no intrinsic value. JP Morgan’s analysts have suggested over the past week that BTC was the “poorest hedge”, while U.S. Treasury Secretary Jannet Yellen weighed in with a warning about the token’s utility in carrying out illegal activities.
What’s certain amid the current happenings with BTC price is that the $50k shoot wasn’t one that really solidifies the digital currency’s prospects towards becoming an accepted currency. What soared its price was the large-scale institutional and individual buying following Tesla’s investment, only to sit on the money and sell it off when most opportune. At this point, the sequence of events seems to be becoming more of a merry go round, with no notion of what’s next.