NEW YORK (BLOOMBERG) - Another bad week for Bitcoin could be a precursor of more pain to come, according to strategists watching the selloff in cryptocurrencies.
Further weakness in its price may bring the US$20,000 zone into view as a downside target, according to Oanda Corp, Evercore ISI and Tallbacken Capital Advisors. Bitcoin has dropped about 7 per cent this week and was trading at about US$34,300 as of 8.12am in London on Wednesday (June 9).
The largest cryptocurrency is “dangerously approaching the US$30,000 level” amid growing regulatory fears in the US, and “a break of US$30,000 could see a tremendous amount of momentum selling,” said Mr Edward Moya, senior market analyst with Oanda.
Bitcoin has dropped about US$30,000 from its April record of close to US$65,000, roiled by a rebuke from billionaire Elon Musk over the energy it requires as well as a renewed regulatory crackdown in China. The ability of US authorities to recover a high-profile Bitcoin ransom also dented the idea that it’s beyond government control, which has been an article of faith for some of the coin’s supporters.
Evercore technical strategist Rich Ross and Tallbacken Capital Advisors’ Michael Purves have both flagged the US$20,000 area as a potential key level if Bitcoin breaks much lower than where it is now.
Others, however, remain confident about the longer-term outlook.
For instance, Mr Michael Saylor’s MicroStrategy boosted a junk-bond sale to US$500 million (S$662 million) from US$400 million to fund the purchase of more Bitcoin. MicroStrategy has emerged as one of the most bullish public companies on cryptocurrencies. In El Salvador, President Nayib Bukele said the nation has adopted Bitcoin as legal tender.
Still, about a week after Bitcoin’s mid-April all-time high, Tallbacken’s Mr Purves had argued the bullish case looked “highly challenged.”
“How much lower can it go?” Mr Purves asked in his note Tuesday. “The most obvious answer continues to be a complete retracement of the breakout from US$20,000 - in other words, back to US$20,000.”
Meanwhile, a debate is intensifying on how heavily to police cryptocurrencies. Ms Hester Peirce, a commissioner with the Securities and Exchange Commission, said she’s worried about a push toward a more active role by regulators in the crypto market, according to a Financial Times interview.