Elon Musk’s embrace of Bitcoin earlier this month week rocketed the cryptocurrency almost 50 per cent higher to more than $58,000. His cold shoulder this weekend has it in free fall.
Bitcoin plunged as much as 17 per cent and briefly back below $50,000 in New York, giving up more than $8,000 in a matter of hours after the world’s richest man tweeted his concern that the price had risen too far too quickly.
”Whatever he (Elon) does is going to dominate the news stream,” ” said Ed Moya, senior market analyst at Oanda Corp
The world’s largest cryptocurrency has been on a tear this month, propelled by purchases from Musk’s Tesla Inc. and institutional investors who say Bitcoin is an attractive alternative to gold and the dollar.
In February alone, Bitcoin was up more than 60 per cent, prompting commentary that the run-up is excessive. The digital token hit a new all-time high on Sunday and came close to surpassing $59,000. It traded at around $52,773 as of 9:49 p.m. in New York.
It’s widely believed that volatile weekend swings are driven by individuals trading the cryptocurrency at home. So it’s also possible that prices fell on Monday as institutional crypto traders, who follow normal business hours, responded to Musk’s Saturday tweet that Bitcoin prices “seem high.”
Meanwhile, JPMorgan Chase & Co. strategists have warned about Bitcoin’s declining liquidity. Strategist Nikolaos Panigirtzoglou wrote in a note on Friday that liquidity for the digital coin was lower than that for the S&P 500 Index and gold, meaning “even small flows can have a large price impact,” he wrote.
“It should go without saying that new investors to Bitcoin should be prepared for major volatility and for prices to drop suddenly and as sharply as they have risen,” according to Neil Wilson, chief analyst at Markets.com.
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