Two-day bitcoin plunge shakes faith in cryptocurrency boom

Tumbling down: The largest cryptocurrency slid as much as 18% over Sunday and yesterday to as low as US$33,500. —Reuters

NEW YORK: The white-knuckle bitcoin ride took another twist as a two-day tumble in the digital currency stoked concern that the polarising cryptocurrency boom may run out of steam.

Bitcoin, the largest cryptocurrency, slid as much as 18% over Sunday and yesterday to as low as about US$33,500.

That’s the biggest two-day slide since May last year and follows a record high of almost US$42,000 on Jan. 8.

“It’s to be determined whether this is the start of a larger correction, but we have now seen this parabola break so it might just be,” said Vijay Ayyar, head of business development with crypto exchange Luno in Singapore.

Cryptocurrencies are becoming emblematic both of the exuberance in financial markets as well as of the concern that the pace of gains is unsustainable.

Believers in bitcoin see it as a maturing asset that provides a hedge against dollar weakness and inflation risk.

Others worry that the rally is untethered from reason and fuelled by vast swathes of fiscal and monetary stimulus.

Bitcoin has shrugged off recent dips and may do so again, potentially recovering to as much as US$44,000 “before the actual correction,” Ayyar said.

It pared losses and as of 1:22pm in Tokyo was around US$35,200.

Rival digital assets are also slumping, with second-largest coin Ether tumbling as much as 20% yesterday. — Bloomberg

The Star, 12 January 2021 (Tuesday)