Is The Bitcoin Price Pullback Over? Why It May Not Return To Its Recent Highs Soon
The pullback in the bitcoin price was short-lived, although it has yet to return to the heights it reached earlier this year. The bitcoin price pullback comes amid a deluge of negative catalysts and headlines, including tweets from Tesla CEO Elon Musk and China’s announcement of new regulations for cryptocurrencies.
Q1 2021 hedge fund letters, conferences and more
Bitcoin price plunges in pullback
The bitcoin price plunged to its lowest level in more than three months, falling to as low as $30,000 for a more than 30% pullback. Ether fell more than 40% in less than 24 hours to tumble below $2,000.
CNBC noted that the recent pullback marks a significant reversal from the steady climb that started in the second half of 2020. The bull rally drove the cryptocurrency’s price through the roof, and despite the recent pullback, it is still up by over 200% since September. Hedge fund managers, companies and banks have been driving the bull rally as adoption of bitcoin among them picks up.
Longtime bitcoin bull Mike Novogratz told CNBC’s Squawk Box on Wednesday that “a lot more people own crypto.” He added that “crypto has seeped into pockets all over our society” and that there has been a “confluence of events” that triggered a liquidation event. The events he mentioned included Tax Day and tweets from Elon Musk.
Decline in support from institutional investors
According to CNBC, one of the reasons for the pullback in the bitcoin price appears to be a reversal in the “theory” of broader acceptance of it. Musk tweeted earlier this year that he was buying over $1 billion for Tesla’s balance sheet.
Additionally, several payments companies upgraded their capabilities for more crypto actions, while major Wall Street banks started building crypto trading teams. Finally, cryptocurrency exchange Coinbase went public via a direct listing last month.
However, Musk said last week that Tesla would stop accepting bitcoin as a payment method due to concerns about the environment. Despite that move, he added on Wednesday that the automaker wouldn’t sell its current bitcoin holdings.
Further, JPMorgan said in a new report that futures contracts suggest institutional investors are rotating out of bitcoin and into gold. Many bitcoin enthusiasts have touted the cryptocurrency as a replacement for the yellow metal as a store of value.
Other speculative trades also falling
CNBC pointed out that the pullback isn’t isolated to the bitcoin price and other cryptocurrencies, which suggests that it could be part of a broader shift away from speculative trades. Growth and tech stocks, which have soared during the pandemic, also started to struggle in recent weeks.
The Ark Innovation exchange-traded fund, which holds high-growth )Z8 and is led by fund manager Cathie Wood, has plunged more than 30% from its highs in February. Additionally, the tech-heavy Nasdaq Composite was down 7% from its recent closing high toward the end of last month.
The declines line up with the delayed tax payment deadline, suggesting that investors cashed in to pay off their capital gains taxes.
The post Is The Bitcoin Price Pullback Over? Why It May Not Return To Its Recent Highs Soon appeared first on ValueWalk.
Source valuewalk