Bitcoin has crashed under the psychological $50,000 per bitcoin level for the first time since early March, losing 10% over the last 24 hours and taking its weekly losses to around 20%. The bitcoin price fell as low as $48,780 on the Luxembourg-based Bitstamp exchange before rebounding slightly.
Some reports said the bitcoin sell-off, which also tanked major cryptocurrencies ethereum, Ripple’s XRP and cardano wiping $200 billion from the combined near-$2 trillion cryptocurrency market capitalization, was sparked by speculation that U.S. President Joe Biden’s plan to raise capital gains taxes could curb crypto investment but it follows warnings in recent days bitcoin and the wider cryptocurrency market could be headed for a correction.
With bitcoin and cryptocurrency market watchers nervously eyeing price charts, Guggenheim Partners’ investment manager (and long-term bitcoin bull) Scott Minerd has cautioned bitcoin is “very frothy” and could be about to experience a “major correction.”
“I think we could pull back to $20,000 to $30,000 on bitcoin, which would be a 50% decline, but the interesting thing about bitcoin is we’ve seen these kinds of declines before,” Minerd told CNBC.
Following bitcoin’s massive 2017 rally, the bitcoin price dropped sharply through 2018, losing almost 90% of its value before rebounding in 2020. The bitcoin price doubled in the first three months of 2021, climbing to around $65,000 this month as Coinbase IPO mania sparked a surge of interest in cryptocurrencies.
Ahead of this latest move lower, a sudden sell-off that wiped $300 billion from the combined cryptocurrency market value last weekend left bitcoin traders and investors reeling.
However, Minerd said he thinks this week’s plunge is part of “the normal evolution in what is a longer-term bull market,” and expects the bitcoin price to eventually rebound far beyond its recent high—potentially climbing to over $400,000.
Bitcoin bulls point to the emergence of long-awaited institutional adoption and the sudden interest from companies keen to add bitcoin to their balance sheets as driving the latest rally, with other tokens boosted by the burgeoning decentralized finance (DeFi) market that’s built on top blockchain networks like ethereum.
Some of these other major cryptocurrencies, many of which have outperformed bitcoin over the last 12 months, have dropped far further than bitcoin during the current sell-off.
Ethereum, the second-biggest cryptocurrency after bitcoin, has lost around 10% over the last 24 hours. The ethereum price hit an all-time high of over $2,500 per ether token this week before giving up its recent gains. Cardano, an ethereum rival that’s seen the price of its ADA token soar in recent months, is off by 12% over the last 24 hours and down just over 25% from its highs.
XRP, a top-five cryptocurrency by value controlled by the embattled company Ripple, is down 20%, adding to losses of 40% in the last week.
Dogecoin, the meme-based cryptocurrency and “joke” bitcoin rival that has soared into the cryptocurrency top five over the last couple of months as pump-and-dump groups try to push up the price, is down 25% from yesterday.
Despite the recent bitcoin and cryptocurrency price plunge, those in the crypto community remain upbeat, pointing to the technological and institutional developments made by bitcoin and crypto over the last couple of years.
“Any comparison with the crypto winter of 2018 belies the amazing growth of the digital token ecosystem,” Paolo Ardoino, chief technology officer at bitcoin and cryptocurrency exchange Bitfinex, said in emailed comments.
“While this percentage may be what it was several years ago, the quantum technological leap that has taken place—both in terms of market structure and the advances in different protocols—may make today qualitatively different.”