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Bitcoin slumps further after Bill Gates, Janet Yellen become latest to question the cryptocurrency’s durability

Bitcoin slumps further after Bill Gates, Janet Yellen become latest to question the cryptocurrency’s durability

SCMP

South China Morning Post | 2021/02/24

Bitcoin has had a bad few days, sliding rapidly from an all-time high. Photo: Reuters

Bitcoin slumped 14 per cent on Tuesday, falling below US$47,000 and taking its pullback from an all-time high hit on Sunday to around 20 per cent.


The slide followed a bout of volatility that highlighted lingering doubts about the durability of the token’s mesmerising rally.


Bitcoin is still up some 390 per cent in the past year.


Treasury Secretary Janet Yellen and Microsoft co-founder Bill Gates were the latest to weigh into a debate over the digital coin. Gates cautioned about how investors can be swept up in manias, while Yellen said bitcoin is a very “inefficient” way of conducting transactions.


In the background are jitters that the global economic recovery from the pandemic will eventually prompt central banks to dial back easy-money policies that helped propel bitcoin higher. At a technical level the digital currency looks stretched, according to Miller Tabak + Co.


A monthly relative-strength index for bitcoin is “extremely overbought,” the company’s chief market strategist Matt Maley wrote in a note at the weekend.


Gates and Yellen muscled in on a discussion that of late had been dominated by Tesla Chief Executive Officer Elon Musk. He has tweeted that bitcoin prices “seem high” but also that the token is a “less dumb” version of cash


Tesla this month disclosed a US$1.5 billion investment in bitcoin, while MicroStrategy boosted a sale of convertible bonds to US$900 million to buy even more of the token.


The bitcoin faithful argue the digital currency is a hedge against risks such as faster inflation and is winning more attention from corporate treasurers and long-term investors. Others see echoes of the digital coin’s 2017 boom and bust.


"It’s a pure speculative asset," said Nader Naeimi, head of dynamic markets at AMP Capital Investors in Sydney.


A pullback in bitcoin shouldn’t be surprising “given the current overleveraged long positions on mainstream coins,” said Annabelle Huang, a partner at Amber Group, a cryptocurrency financial-services firm.


The Bloomberg Galaxy cryptocurrency Index, which spans bitcoin, Ether and three other digital currencies, declined as much as 13 per cent.


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