Bloomberg
(Bloomberg) -- Bitcoin dropped Monday as traders eased up on stimulus-fueled bets that had powered the digital token to a fresh record over the weekend.The largest cryptocurrency slumped by as much as 9.2% before trading at $56,131 as of 1:04 p.m. in New York, after topping out at $61,742 on Saturday. Bitcoin reached its latest all-time high on optimism that some of the pandemic relief payments in the U.S. will end up chasing the digital token’s towering rally.“The stimulus news was bid up by everyone in the Bitcoin world over the weekend,” Jeff Dorman, chief investment officer for Arca, an investment management firm specializing in digital assets, said in a phone interview. “Then we came in last night, futures were flat, 10-year was flat, and all of a sudden that started to unwind because there wasn’t nearly as much of a bullish overtone as some of the Bitcoin traders thought there might be.”Dorman also pointed out how leverage in crypto markets can lead to selling pressure amid broader declines.“There’s just an insane amount of leverage in the system at all times,” he said. “During any period of exuberance, you see investors borrowing to lever up, and over the weekend we saw all the risk metrics we watch start to really get frothy. Generally, when that starts to happen, it’s only a matter of time before the slightest hiccup starts to liquidate those levered positions.”The lively debate over the scope for more stimulus-fueled gains, and whether it’s even possible to work out a long-term value for Bitcoin, continues apace. The token has climbed more than 1,000% in the past year, pushed higher by signs of increased institutional and corporate interest alongside the usual speculative demand.Crypto has seen “some good flow, with traders front running U.S. stimulus checks,” Chris Weston, head of research at Pepperstone Group Ltd., wrote in a note, adding Bitcoin needs to stay above the previous high of just over $58,000 to bolster confidence in a “new bull leg.”Bitcoin-Gold Ratio Hits Record After Token’s 1,000% Jump: ChartJeffrey Halley, senior market analyst at Oanda Asia Pacific Pte, and Matt Maley of Miller Tabak + Co both see the potential for further gains based on some recent chart patterns. Bitcoin could rally toward $75,000 “very quickly,” Maley said. Bloomberg Intelligence strategist Mike McGlone has said $100,000 could be the next threshold.The fortunes of a range of companies are increasingly tied to the cryptocurrency, from listed Bitcoin miners and brokers to firms that have invested in the token.For instance, the correlation coefficient between Bitcoin and an equal-weighted basket of five stocks which have announced investments in the digital currency -- Tesla Inc., MicroStrategy Inc., Square Inc., Meitu Inc. and Aker ASA -- has surged to an average of 0.72 this year from 0.26 in 2020.Crypto watchers are trying to gauge the outlook. Greg Waisman, the co-founder of the global payment network Mercuryo, said in emailed comments Sunday there is some recent “whale activity,” where coins from 2013 were being moved for the first time. Such events, he said, usually lead to selloffs.(An earlier version corrected Nick Jones’s title.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
