Bitcoin bounces back after tumbling below US$30,000 threshold

Such trading signals that Bitcoin traders could find themselves in choppy waters for weeks to come, says an analyst.
Such trading signals that Bitcoin traders could find themselves in choppy waters for weeks to come, says an analyst.PHOTO: REUTERS

NEW YORK (BLOOMBERG) - Bitcoin whipsawed investors by tumbling below US$30,000 for the first time since January and erasing gains for the year before recouping the day's losses.

The original cryptocurrency closed out the New York trading session on Tuesday (June 22) marginally higher at around US$32,900, after falling as much as 12 per cent.

The wild ride continued subsequently, since Bitcoin trades around the clock, with the digital token tracking slightly lower again. It has lost more than 50 per cent from its mid-April high of almost US$65,000.

The coin started 2021 trading around US$29,000 following a fourfold increase last year.

Such trading signals "that Bitcoin traders could find themselves in choppy waters for weeks to come", said Mr Sean Rooney, head of research at crypto asset manager Valkyrie Investments.

Chart-watchers said Bitcoin, which failed to retake US$40,000 last week, could have a tough time finding support in the US$20,000 range following its drop below US$30,000. Still, Bitcoin had prior to Tuesday breached US$30,000 during at least five separate instances this year but recuperated to trade above that level each time.

"Any meaningful break below US$30,000 is going to make a lot of momentum players to throw in the towel," said Mr Matt Maley, chief market strategist for Miller Tabak + Co. "Therefore, even if Bitcoin is going to change the world over the long term, it does not mean it cannot fall back into the teens over the short term."

It is a remarkable comedown for the digital asset which just weeks ago was trekking higher amid a warmer embrace from Wall Street as well as retail investors. But negative press about its energy use, brought on largely by Tesla's Elon Musk, as well as a clampdown from China have pushed it lower in recent weeks.

China's latest broadside came on Monday, when the nation's central bank said it had summoned officials from the biggest lenders as well as AliPay to reiterate a ban on cryptocurrency services. Chinese officials are already trying to root out crypto mining operations.

"Bitcoin's continued sell-off has contributed to a negative outlook by traders driven by bearish news out of China," said Mr Nick Mancini, research analyst at crypto sentiment analytics provider Trade The Chain. "The mood among traders is now continuing to sour."

Exuberant rallies and quick drawdowns are not uncommon for Bitcoin and other cryptocurrencies. Bitcoin underwent a renaissance in 2017, rising more than 1,000 per cent that year, only to lose roughly 75 per cent in the following year. And last year, it advanced 300 per cent.

"The most speculative part of the market is cryptocurrency," said Mr Eric Diton, president and managing director of The Wealth Alliance. "At the end of the day, what determines the value of Bitcoin is acceptance and more demand and supply. When you have a country like China come out against Bitcoin, that really hurts it's global acceptance and that's why you're seeing the value deteriorate as much as it has."