Bitcoin’s losses accelerated, with prices tumbling below $50,000, as investors started to bail on the market’s frothiest assets.
The cryptocurrency was down 15% on Tuesday and traded around $46,000. While the selloff only puts Bitcoin prices at the lowest in about two weeks, investors will be wondering whether it marks the start of a bigger retreat from crypto or simply represents volatility in an unpredictable market.
Bitcoin has been battered by negative comments this week, with long-time skeptic and now Treasury Secretary Janet Yellen saying at a New York Times conference on Monday that the token is an “extremely inefficient way of conducting transactions.”
Microsoft Corp. co-founder Bill Gates also weighed in. In an interview with Bloomberg Television’s Emily Chang, the billionaire said he’s not a fan of Bitcoin and warned against retail investors being swept up in speculative manias.
"It’s a pure speculative asset," said Nader Naeimi, head of dynamic markets at AMP Capital Investors in Sydney.
Other markets that have seen massive gains this year sold off sharply on Tuesday. Tesla Inc. sank 6% in pre-market trading, while Cathie Wood’s flagship $28 billion ARK Innovation ETF dropped around 7% at one point. The Bloomberg Galaxy Crypto Index, which spans Bitcoin, Ether and three other digital tokens, declined 19%.
At a technical level, Bitcoin looks stretched, according to Miller Tabak + Co. A monthly relative-strength index is “extremely overbought,” chief market strategist Matt Maley wrote in a weekend note.
Bitcoin prices have soared more than 50% this year as more investors buy in to the argument that digital currencies can act as a hedge against inflation. 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 crypto financial-services firm.