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February 24, 2021

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Bitcoin slips further amid doubts over evaluation

Bitcoin dropped below US$50,000 yesterday, as investors began to get a little nervous about the digital currency’s lofty valuation and some leveraged players took profit.

The cryptocurrency fell more than 10 percent, its largest daily drop in a month, to hit US$48,575. That extends a sharp withdrawal of more than 16 percent from a record high hit on Sunday, although bitcoin remains up around 75 percent for the year.

The drop came despite broad US dollar weakness.

“The market’s rallied almost unimpeded since the beginning of the month and to some degree since the start of the year,” said James Quinn, managing director at digital asset platform Q9 Capital in Hong Kong.

“Seeing some selling at all is perfectly healthy and normal,” he said, though adding that some US$1.5 billion in liquidation of leveraged positions on crypto exchange Binance was large and suggested retail investors might be selling.

The cryptocurrency market has been hot this year as big money managers begin to take the asset class seriously and have made large purchases that have driven more confidence among small-time speculators.

A US$1.5 billion investment in the crytocurrency by electric carmaker Tesla this month has helped vault bitcoin above US$50,000 but may now lead to pressure on the company’s stock price as it has become sensitive to movements in bitcoin.

United States Treasury Secretary Janet Yellen, who has flagged the need to regulate cryptocurrencies more closely, also said on Monday that bitcoin is extremely inefficient at conducting transactions and is a highly speculative asset.

Ether, a coin linked to the ethereum blockchain, which often moves in tandem with bitcoin, also dropped more than 10 percent.


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