Bitcoin’s record high of $34,800 came within three weeks after it broke $20,000 for the first time on December 16. Bitcoin fell sharply on Monday, falling from a record high of $34,800 reached a day ago, and traders said the volatility of the highly leveraged futures market.
Bitcoin fell by more than 14%, having previously hit $33,670, and wiped out more than half of its 20% increase on New Year’s Eve to a record $34,800. Bitcoin recently fell 9% to $30,077.
Since 2017, the functional cryptocurrency derivatives market has developed, and offshore exchanges still provide highly leveraged transactions. Volatility in such a market can have a huge impact on the price of Bitcoin.
Richard Galvin of Digital Asset Capital Management, a crypto fund, said: “This is the cessation of some of the leverage.” Bitcoin’s record high was less than three weeks after it broke $20,000 for the first time on December 16.
Traders said that for volatile assets, Bitcoin’s fall on Monday is not uncommon, and its sharp price fluctuations have prevented it from being widely used as a currency to some extent. Joseph Edwards of Enigma Securities, an encryption brokerage firm, said: “In essence, it is still an inevitable volatile asset.
He added: “In most cases, this looks like a purely technical move, indicating and caused by a short-term euphoria.”
It has always been believed that it can be used as a hedging tool for inflation risks because the government and central bank have initiated stimulus measures to deal with the economic impact of the COVID-19 pandemic, which has promoted the rebound of Bitcoin.
Moh Siong Sim, a currency analyst at Bank of Singapore, said of its recent rebound: “Some of them reflect concerns about a weaker U.S. dollar.”
The development of Bitcoin also reflects people’s expectations that it will become a mainstream payment method. Its potential to make quick profits has also attracted greater demand from American investors.