(Bloomberg) -- Bitcoin gave up all the gains that pushed it to a fresh record over the weekend as exuberance around a new injection of stimulus waned.
The world’s largest cryptocurrency fell as much as 5.5% on Tuesday before trimming some losses to trade at $56,640 at 12:57 p.m. in New York. The token had hit a high on Saturday of $61,742. The Bloomberg Galaxy Crypto Index, tracking Bitcoin, Ether and three other cryptocurrencies slumped as much as 5%.
“There will certainly be some correction in Bitcoin and other cryptocurrencies because they have rallied so much in a short period of time,” said Atichanan Pulges, chief financial officer of Bitkub Capital Group Holdings Co., operator of Thailand’s biggest cryptocurrency exchange. “The long-term outlook remains very bullish, as many more leading financial institutions are considering adopting cryptocurrencies.”
On a technical basis, the GTI Global Strength Indicator, which detects trend fluctuations, has begun to curl downward, suggesting a bearish move for Bitcoin in the near-term. The last time the token triggered this sell signal, the price declined about an additional $14,600. Industry participants have also pointed to profit taking after Bitcoin set a record. The digital token has surged about 1,000% over the past year, a mesmerizing rally that outstripped more traditional assets like stocks and gold.
Bitcoin and other cryptocurrencies have returned to prominence over the past year amid signs of broader investor interest, such as Tesla Inc.’s $1.5 billion Bitcoin purchase. Detractors argue the token may be in a speculative bubble spurred by the massive influx of stimulus from fiscal and monetary policy amid the pandemic.
Crypto traders have been positioning for the arrival of the next round of U.S. stimulus checks and are betting some of that money will find its way to Bitcoin. A recent survey by Mizuho Securities showed that 10% of money injected into the economy through stimulus checks could flow into stocks and cryptocurrencies.
“You’re going to see a portion of that check used to invest in Bitcoin and cryptocurrencies instead of other avenues,” said John Wu, president of crypto firm Ava Labs. However, he noted that it likely won’t have the same impact that the last injection of stimulus had as vaccinations ramp up and people venture out.
“We’re opening up, people are going outside again. So, part of the first round of checks, where people invested in stocks and in crypto, is because they got stuck at home and they found new ways to entertain themselves,” Wu said. “It will be a lesser effect than people think.”
©2021 Bloomberg L.P.
RECOMMENDED FOR YOU
POPULAR