The price of bitcoin has bounced back from the plunge it saw over the weekend, which took it from a new all-time high near $42,000 to a low under $30,500 before it started recovering. While analysts are puzzled as t what’s in store for the cryptocurrency, some assert the correction was “healthy.”
The flagship cryptocurrency is now trading at $35,150 and while far from its all-time high it’s still above the $19,000 high seen in late 2017, when retail investors helped the crypto’s price swell to an all-time high that was lost after the initial coin offering (ICO) bubble popped.
Bitcoin’s recent volatility saw some recall the fall from 2017, which ended in late 2018 at little over $3,000 after a year-long bear market. Speaking to Bloomberg David Grider, lead digital strategist at Fundstrat Global Advisors, said:
We think a pull back is healthy.
Grider added he doesn’t believe the drop indicated BTC’s price rally had topped out. Investors who bought BTC before this year are still in the green, with those who bought the cryptocurrency one year ago still being up at least 300%.
Most cryptocurrency enthusiasts believed the rally was supported by corporate adoption, as companies like Square, MicroStrategy, MassMutual, Ruffer Investment, and One River bought millions worth of BTC as a hedge against inflation and currency debasement.
PayPal has also started letting its users buy, sell, and hold BTC, ETH, LTC, and BCH, which made it easier for retail investors to gain exposure to top cryptocurrencies. What caused the plunge over the weekend is unclear, after heavy selling led to a long squeeze.
Per Bloomberg, BTC’s drop could have been related to a bounce in the U.S. dollar, which snapped a prolonged losing streak after it was bolstered by rising U.S. government bond yields. Vijay Ayyar, head of business development at crypto exchange Luno, pointed out the USD is gaining strength, adding that if the U.S. Dollar Index powers through 92 we “may have seen a Bitcoin top at $40,000.”
As monetary and fiscal stimulus keep coming, some believe part of the funds could end up in the cryptoasset space, as BTC could be a viable hedge for inflation risk and potential fiat currency debasement. Howard Wang, co-founder of Convoy Investments, wrote:
As long as the world is flooded with money and safe assets offer poor compensation, Bitcoin will be relevant. Volatility and asset bubbles will be a fact of life.
On social media Dan Held, Kraken’s head of growth, pointed out that just in the last bull cycle “there will be several dips in this one.” Held added that those who hold onto their coins “will be rewarded” for their conviction.
The Kraken executive has earlier this month commented that he believes BTC’s price is set to grow much higher in the next couple of years thanks to institutions and retail investors putting “trillions of dollars” into BTC.
Featured image via Pixabay.