The sharp sell-off of Bitcoin this week is giving raise new questions regarding the sustainability of the booming cryptocurrency.
The prices of digital assets have dropped by almost 14% this week. This indicates the steepest fall of Bitcoin since March 2020. BTC was steady on Friday as it held nearly $31,000. In the meantime, the commentators had warned against a sustained decline of less than $30,000 that could bring in more losses.
A Bleak Future Of Bitcoin
Jeffrey Halley, a senior analyst of the stock market at the Oanda Asian Pacific has recently stated that a mere 10% slump in the intraday trading of Bitcoin is harmless to this leading cryptocurrency. This is due to the reason that BTC can easily hit $35,000 again the next day or slump below $30,000 to test their $27,000 support.
BTC had successfully managed to reach $42,000 on 8th January which was a new all-time high. This marked the risk that BTC is willing to take in financial markets before the stimulus. Many said that BTC has become a mainstream investment and a safe bet against dollar weakness and faster inflation. While others see it as speculative mania.
Several factors can be held responsible for this BTC rally including BTC funds, billionaires, momentum chasers, day traders, companies, or institutional investors.
Grayscale Investments had a massive $3 billion inflow of Bitcoin throughout their 4th quarter. BlackRock Inc. has also started trading with cryptocurrency recently by allowing cash-settles BTC futures today itself.
The recent comments from Janet Yellen can also be one of the reasons that BTC swoon this week. During the confirmation hearing of her Senate position, Yellen informed the cryptocurrency is an area of concern for criminal financing and terrorist.