Bitcoin slump continues, falls below $50,000 as caution sweeps over crypto rally

Bitcoin slid Tuesday after a bout of volatility highlighted lingering doubts about the durability of the token’s mesmerizing rally.

In its early years, Bitcoin suffered reputational damage because it was adopted by criminals and used for illicit transactions. (REUTERS)

Bitcoin slid Tuesday after a bout of volatility highlighted lingering doubts about the durability of the token's mesmerizing rally.

The cryptocurrency fell as much as 12.5 percent to $48,071 and was trading below $50,000 as of 8:16 a.m. in London. At one point Monday it plunged 17 percent before paring the slide. Bitcoin is still up some 390 percent in the past year.

Treasury Secretary Janet Yellen and Microsoft Corp. 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 weekend note.

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

Bitcoin slid Tuesday after a bout of volatility highlighted lingering doubts about the durability of the token's mesmerizing rally.

The cryptocurrency fell as much as 12.5 percent to $48,071 and was trading below $50,000 as of 8:16 a.m. in London. At one point Monday it plunged 17 percent before paring the slide. Bitcoin is still up some 390 percent in the past year.

Treasury Secretary Janet Yellen and Microsoft Corp. 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 weekend note.

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

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

Bitcoin faithful argue the digital currency is a hedge for 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 crypto financial-services firm.

The Bloomberg Galaxy Crypto Index, which spans Bitcoin, Ether and three other digital tokens, declined as much as 13 percent.