Worst Bitcoin plunge since March shakes faith in crypto boom

Hong Kong

THE white-knuckle Bitcoin ride took another twist on Monday as the worst two-day tumble in the digital currency since March stoked concern that the polarising cryptocurrency boom may run out of steam.

Bitcoin, the largest cryptocurrency, slid as much as 21 per cent over Sunday and Monday to as low as US$32,389. That's the biggest two-day slide since global markets were first roiled by the pandemic 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.

Bitcoin's price has more than quadrupled in the past year, evoking memories of the 2017 mania that first made cryptocurrencies a household name before prices collapsed just as quickly.

"Time to take some money off the table," Scott Minerd, chief investment officer with Guggenheim Investments, said in a tweet from his verified Twitter account. "Bitcoin's parabolic rise is unsustainable in the near term." Mr Minerd in late December predicted Bitcoin could eventually reach US$400,000.

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True believers in Bitcoin argue the rally this time is different from past boom-bust cycles because the asset has matured with the entry of institutional investors and is increasingly seen as a legitimate 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, with Bitcoin unlikely to ever serve as a viable currency alternative.

"Bitcoin is almost certainly in another bubble and its current growth rate is not sustainable," Howard Wang, co-founder of Convoy Investments said in a Jan 10 note. "While it may mature in the future, Bitcoin as it exists is largely a speculative asset."

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

Bitcoin was holding near session lows at about US$33,200 as of 7:08 am in London. Rival digital assets are also slumping, with second-largest coin Ether tumbling as much as 21 per cent. BLOOMBERG