HONG KONG • Bitcoin extended its decline yesterday amid a wider retreat in assets that had earlier ridden a wave of stimulus-infused optimism among retail traders.
The largest cryptocurrency slid as much as 4.7 per cent to a two-week low and was at about US$52,250 as at 12.48pm in Hong Kong. The token is mired in its longest losing streak since December. The wider Bloomberg Galaxy Crypto Index is also struggling.
Speculation is growing that more of the latest stimulus cheques in the United States will be spent in the real economy rather than markets as vaccinations help to return life to something more like normal.
The number of call options traded in the US has slipped from the records earlier this year, and high-profile investments like GameStop and the ARK Innovation ETF are sliding.
A general bitcoin downtrend is being "exacerbated by the move to value in general across asset classes" and away from areas like technology, said Mr Vijay Ayyar, head of the Asia-Pacific with crypto exchange Luno in Singapore.
The upcoming expiry of derivative contracts is adding to the volatility, he said.
Bitcoin is down about 15 per cent from a record of US$61,742 earlier this month but remains 700 per cent higher over the past year. The cryptocurrency spiked briefly on Wednesday after a series of tweets from Tesla chief executive Elon Musk announcing that the carmaker will accept the digital asset as payment.
The token remains mainly a vehicle for speculation and is unlikely to displace alternative stores of value, according to Ms Blythe Masters, a former JPMorgan Chase & Co executive who is now chief executive of Motive Capital. Others argue that institutional adoption of bitcoin is expanding as part of efforts to diversify portfolios and hedge risks like faster inflation.
"The colour and information we see from the street is largely from the institutional part of the market, and nothing has really changed in their view on the impact of stimulus on longer-term inflation and the role of digital assets as a hedge to that," said Mr Matt Long, head of distribution and prime brokerage at digital asset platform OSL in Hong Kong.