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Bitcoin dips more than 20 per cent in three days

written by Bella Palmer

Bitcoin first surpassed the US$20,000 mark in mid-December and surged above US$30,000 earlier this month

Bitcoin prices surged to a new all-time high of nearly US$42,000 on Friday, only to plunge all the way back to about US$31,000 Monday morning.

That's a more than 20 per cent drop - which means bitcoin is now in a bear market, as bizarre as it sounds.

In investment terms, a bear market is when a security drops 20 per cent or more due to investor pessimism.

A bull market is the near opposite, where a security is rising due to investor confidence and willingness to trade.

Bitcoin is still up a lot over the past few months, not to mention from where it was trading just a few weeks ago.

But the drop highlights how the stunning rise has raised alarm bells among some on Wall Street.

It's scary when the price of bitcoin just goes straight up, said James Putra, vice president of product strategy for TradeStation Crypto. This pullback was needed.

Just last week a strategist at Bank of America said bitcoin's surge may be the "mother of all bubbles," noting that the recent spike is larger than other notorious manias of the past few decades: gold in the 70s, dot-coms/tech in the late 1990s and housing in the mid-2000s.

So the drop of the past few days is a "healthy correction" that "was due a long time ago," according to Naeem Aslam, chief market analyst at AvaTrade.

Bitcoin first surpassed the US$20,000 level in mid-December and soared above US$30,000 earlier this month - a huge rebound from a low of just above US$4,000 as the COVID-19 outbreak sent global financial assets plummeting last spring.

Even with the drops over the weekend and Monday, bitcoin is still up more than 10 per cent already in 2021 - and it has soared about 300 per cent in the past 12 months.


The opinions expressed by our writers are their own and do not represent the views of UK Investment Guides. The information provided on UK Investment Guides is intended for informational purposes only. UK Investment Guides is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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