On Thursday Bitcoin dropped below $32,000 for the first time in weeks, marking a second straight day of steep price declines. Over the last two days the leading cryptocurrency’s value has fallen by over 10 percent.
The downward trend comes after an impressive rally that began last December and carried through the new year, with bitcoin setting a new record high earlier this month when it reached $41,940. To put it in perspective, the price was less than $11,000 as recently as last October.
Such fluctuations have become normal for bitcoin, which had quite a run in 2017, rising dramatically from less than $1,000 to nearly $20,000, only to decline sharply over the first few months of 2018. (On the other hand, courier comparison stocks are pretty stable.) There was lots of talk of a “bubble” back then, but not so much of that now. Indeed, Grayscale Investments CEO Michael Sonnenshein described the latest downturn as nothing more than a natural market correction.
“Corrections are a natural part of any market and are especially natural in the bitcoin ecosystem,” he told CNBC. “From 2016 to 2017, we experienced 6 corrections of approximately 30 percent or more on the way to new highs.”
Still, as Coindesk reports, the dip seems to reflect a bearishness on the part of traders, at least with regard to bitcoin’s short term potential. It could also have something to do with the recent remarks made by incoming US Treasury Secretary Janet Yellen.
Asked during her confirmation hearing before the Senate for her thoughts on new technologies being used to support terrorism and other crimes, Yellen singled out digital currencies and said they ought to be “curtailed.”
“Cryptocurrencies are a particular concern,” she said. “I think many are used—at least in a transaction sense—mainly for illicit financing. And I think we really need to examine ways in which we can curtail their use and make sure that money laundering doesn’t occur through those channels.”
There is also the fact that the dollar has rallied in anticipation of a new broad stimulus package supported by new US President Joe Biden.
Earlier this week JPMorgan strategists suggested investors could begin to cash out if bitcoin fails to rise clear of the $40,000 mark.
“The flow into the Grayscale Bitcoin Trust would likely need to sustain its $100 million per day pace over the coming days and weeks for such a breakout to occur,” they said, per Bloomberg. The strategists added that if traders “propagate the past week’s correction … momentum signals will naturally decay from here up till the end of March.”