Bitcoin is still one a lot of over the past few months, not to mention where it traded a few weeks ago. But the decline shows how the astonishing rise raised alarm bells among some on Wall Street.
“It’s scary when the price of bitcoin just goes up,” said James Putra, vice president of product strategy for TradeStation Crypto. “This withdrawal was necessary.”
Last week, a strategist at Bank of America said bitcoin’s surge may be the “ mother of all bubbles, ” noting that the recent spike is greater than other infamous manias of the past decades: 1970s gold, dot coms / tech in the late 1990s and housing in the mid 2000s.
So the decline in recent days is a “healthy correction” that “should have been a long time ago,” said Naeem Aslam, chief market analyst at AvaTrade.
Bitcoin first surpassed the USD 20,000 level in mid-December and rose above USD 30,000 earlier this month – a massive rebound from a low of just above USD 4,000 as the Covid-19 outbreak caused global financial assets to plummet last spring.
Even with the declines over the weekend and Monday, bitcoin is still up more than 10% in 2021 – and it’s up about 300% in the last 12 months.
Aslam said in a report that bitcoin could fall to the USD 28,000 to USD 30,000 level before hitting the bottom.
“Now is not the time to panic, but to look at this opportunity with a more optimistic lens,” said Aslam, “as the bull run is not over and it will probably make its way to the top.”
Many bitcoin bulls remain optimistic about the future of cryptocurrencies, citing the fact that digital payment giants Square (SQ) and PayPal (PYPL) let users buy and sell it, and many top institutional investors, including Paul Tudor Jones, Stanley Druckenmiller and Anthony Scaramucci, invest in it.
A top man at Black rock (BLK), the world’s largest asset manager, recently said bitcoin could replace gold as the main asset investors can use to hedge against inflation and a weaker dollar.