Bitcoin dropped all of its weekend trading gains as analysts wondered if the cryptocurrency was overheated.
Prices fell 6.6% during the European session, falling back to around $ 55,000. Rival cryptocurrency ether fell 7% to $ 1,798.
The world‘s largest cryptocurrency has been in tears this month, propelled by purchases from Tesla Inc. and institutional investors who say Bitcoin is an attractive alternative to gold and the dollar.
In February alone, Bitcoin rose by more than 60%, prompting the race to be excessive. The digital token hit a new all-time high on Sunday and nearly passed $ 59,000.
It is widely believed that volatile weekend fluctuations are caused by individuals trading cryptocurrency at home. So it’s also possible that prices fell on Monday as institutional crypto traders, who follow normal business hours, responded to Elon Musk’s Saturday tweet that Bitcoin prices “look high.”
“This is mainly due to a massively long speculative market combined with Elon Musk saying it seems a bit over the top,” said Jeffrey Halley, senior analyst at Oanda Corp.
Bitcoin drops to 6.6% after hitting record high
Meanwhile, strategists at JPMorgan Chase & Co. have warned of declining Bitcoin’s liquidity. Strategist Nikolaos Panigirtzoglou wrote in a note on Friday that the liquidity of the digital coin was lower than that of the S&P 500 index and gold, meaning that “even small flows can have a big impact on prices. ”He wrote.
“It goes without saying that new Bitcoin investors need to be prepared for major volatility and a sudden, sharp drop in prices as they’ve increased,” said Neil Wilson, chief analyst at Markets.com.