Bitcoin dropped sharply on Monday, losing support from a record high of $34,800 a day earlier, with traders citing uncertainty in heavily leveraged futures markets.
Bitcoin dropped over 14 percent after first reaching as high as $33,670, wiping out more than half of its 20 percent New Year’s Eve surge to a historic $34,800 on Sunday.
Bitcoin was down 9 percent at $30,077.
Since 2017, a working cryptocurrency futures market has emerged, with offshore exchanges also offering highly leveraged trading. Moves in those markets may have an immense influence on the price of Bitcoin.
Richard Galvin of the crypto fund Digital Asset Capital Management said that it is the unwinding of some of that leverage.
Bitcoin’s record peak was less than three weeks after it reached $20,000 (roughly Rs. 14.6 lakhs) for the first time on December 16. The world’s largest cryptocurrency has more than quadrupled last year’s worth.
Traders said the collapse of Bitcoin on Monday was not uncommon for a risky commodity whose crazy market fluctuations have partially stopped it from being commonly used as a currency.
Joseph Edwards of crypto brokerage Enigma Securities said that it is a volatile asset by its nature that is still unavoidable.
He added that for the most part, this looks like a purely technical move, signaled and caused by short-term euphoria.
The fuelling Bitcoin rally has been the belief that it will serve as a buffer against the possibility of inflation as governments and central banks turn to the stimulus to fight the economic effect of the COVID-19 pandemic.
“Some of it is reflecting the fear of a weaker dollar,” Bank of Singapore currency analyst Moh Siong Sim said of his most recent rally.
Bitcoin’s advance also mirrored hopes that it would become a popular payment tool. Its capacity for fast returns has also drawn demand from big US investors.
