The price of Bitcoin plummeted by nearly 10% on Thursday. Prior to this, more and more mainstream institutions have accepted Bitcoin, which drove its price soaring, leading to the increasing bearish voice of regulators and analysts.
JP Morgan Chase analysts stated in a report to clients that Bitcoin’s increasing acceptance by mainstream institutions “increases the correlation with cyclical assets, which may change cryptocurrency from insurance into leverage”.
Analysts stated that Bitcoin “is the most unreliable hedging tool during periods of severe market pressure”. This is in stark contrast to the views of other Wall Street experts who claim that investors are flocking to the world’s largest cryptocurrency as a “legitimate hedging tool against inflation”.
At the same time, Yellen, nominee of US President Biden’s Treasury Secretary, said on Tuesday that cryptocurrencies were “particularly worrying”, implying that lawmakers should take action to restrict their use, “especially to ensure that they are not used for illegal financing”.
Craig Erlam, senior market analyst of Oanda, said on Thursday: “At the end of such a strong month, Bitcoin has shown some vulnerabilities. On Wednesday, it encountered some pressure at $34,000. And then it began to fall and it is very likely to fall to 30,000 US dollars.” He added: “This level looks very fragile and falling below this level is bad news both for Bitcoin and cryptocurrencies in general in the near future.” He also said that he would not be surprised if the price of Bitcoin fell to $20,000 before breaking new highs.