Bitcoin has come under pressure, falling 12% on Thursday amid growing concerns over regulatory oversight.
Upcoming U.S. Treasury Secretary Janet Yellen – whose nomination will be voted on Friday by the Senate Treasury Committee – earlier this week flagged the cryptocurrency as a means of “ illegal funding. ” Those comments raised concerns that the new government could enforce a crackdown on cryptocurrency.
Any regulation could flush out some of the funds that have poured into bitcoin in recent months, said Matt Maley, chief market strategist at Miller Tabak.
“If the government comes and wants to regulate that more, I think some of this excess liquidity will disappear and move to another area,” Maley told CNBC’s “Trading Nation” on Thursday. “That could make for a pretty significant drop, even if I think it will go higher in the long run.”
It’s not the only short-term risk to bitcoin, Maley said. After rising more than 200% in the past six months, Maley said it could also be due to a relapse. For technical confirmation of more downsides, Maley is looking to see if it breaches its January 11 low.
“It would probably take a drop below its lows during the day from that day on, which is down around $ 30,300, but that would bring a lot of this momentum money, this short-term momentum money, to resolve it, and the would be a fairly significant further decline, ”said Maley.
He pointed to $ 25,000 as a possible bottom, which would mean a retracement of about 50% since the peak in early January. However, he sees crypto as a long-term bet that will evolve higher.
“You’re going to see those big moves and big drops in bitcoin, so traders are going to have to be very, very nimble, and long-term investors are going to have to have a really strong stomach,” he said.
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