Bitcoin retreats from record high as 'bubble' sound grows louder

(Bloomberg) — Bitcoin continued to retreat from its record high amid growing debate over whether the rise in cryptocurrencies is evidence of speculative froth in global markets.

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The largest digital asset fell as much as 5.6% in Asian trading on Friday before paring some of the decline to trade at $67,300 as of 1:43pm in Singapore. The token set a new all-time peak of around $73,798 the previous day.

Both Bitcoin's progress this year and the top 100 tokens metric – which includes the likes of Ether, BNB and Solana – have fallen by nearly 60%.

Bets on the Federal Reserve's looser monetary policy have helped global stocks, bonds and cryptocurrencies rise in the past few months, but investors are reevaluating those bets after evidence of persistent inflationary pressure in the United States emerged.

Trouble in the future?

In an interview with Bloomberg TV, Michael Hartnett, chief investment strategist at Bank of America Corp, said markets were showing characteristics of a bubble in the record rise of so-called Magnificent Seven stocks in the technology sector and all-time highs in cryptocurrencies.

These comments are fueling a live debate on Wall Street about whether many markets are vulnerable to a pullback. For Bitcoin, proponents point to about $12 billion in net inflows into dedicated US exchange-traded funds and an upcoming decline in token supply growth as key support.

A jump in US producer prices has raised concerns that the Federal Reserve's campaign to control inflation is far from over, a report released on Thursday showed.

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Bitcoin “was undermined by higher US and US dollar yields that followed hot producer price inflation data,” Tony Sycamore, a market analyst at IG Australia Pty, wrote in a note.

The token's tumble came alongside signs of increased caution in the derivatives market, which has recently been a dampener on bullish enthusiasm.

Coinglass data indicates that $526 million worth of bullish cryptocurrency bets were liquidated in the past 24 hours – the most in almost two weeks. The funding rate, or cost of positions in perpetual bitcoin futures contracts – which are popular with speculators because they have no set expiration date – has fallen, according to Cryptoquant figures.

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