Bitcoin's fizzling 2021 returns start to lag mainstream assets

Bitcoin is still up 14 per cent this year but that trails commodities as well as some European and Asian share gauges.
Bitcoin is still up 14 per cent this year but that trails commodities as well as some European and Asian share gauges.PHOTO: REUTERS

HONG KONG (BLOOMBERG) - The returns from Bitcoin this year are sliding below traditional assets as cryptocurrencies struggle to claw back ground lost in a rout in May.

The largest token tumbled almost 6 per cent at one point in Asian trading on Tuesday (June 8) and was at a two-week low of about US$33,000 (S$43,660) as of 1.07pm in Hong Kong. The wider Bloomberg Galaxy Crypto Index fell as much as 10 per cent.

Bitcoin is still up 14 per cent this year but that trails commodities as well as some Asian and European share gauges. The proximal cause of Tuesday's weakness was unclear - one theory was that the recovery of a high-profile Bitcoin ransom by the US showed the token isn't beyond official control to the extent claimed by its biggest proponents.

The fact that investigators "could trace the untraceable and seize it might be undermining the libertarian, free-of-government-control case," said Jeffrey Halley, a senior market analyst at Oanda. The implications of that may have provoked the selling, he said.

The US recovered almost all the Bitcoin ransom paid to the perpetrators of the cyber attack on Colonial Pipeline last month in a sign that law enforcement is capable of pursuing online criminals even when they operate outside the nation's borders.

Strategists such as Mr Halley and Evercore ISI's Rich Ross are watching key technical levels for Bitcoin. Halley said a break below US$30,000 could lead to "another capitulation." RMr oss sees a test of support around US$29,000.

Bitcoin has plunged from a peak of almost US$65,000 in mid-April, casting a pall over the cryptocurrency sector. The selloff was exacerbated by billionaire Elon Musk's public rebuke of the amount of energy used by the servers underpinning the token. Harsh Chinese regulatory oversight also soured the mood.