Given Ruvic / Reuters
Bitcoin even fell 18% to $ 45,000 on Tuesday, before some losses were slightly reduced as sky-high valuations of cryptocurrencies unsettled investors.
The cryptocurrency traded 13% lower at $ 47,608.24 as of 11:45 p.m. in New York.
Bitcoin rose in 2021, and the price has more than doubled this year to hit a record $ 58,350.41. The increased interest of big companies like Tesla as well as record incentives drove the rally forward.
Still, investors seemed to be rethinking Monday’s record run. Bitcoin fell from just under $ 58,000 to below $ 47,000 before recovering somewhat.
The decline coincided with a sharp fall in technology stocks, with the US Nasdaq index falling 2.46%, suggesting that investors were wary of the more expensive parts of the market. Both Bitcoin and tech stocks fell again on Tuesday.
The expectation of stronger growth and inflation has boosted bond yields and made the riskier areas of the market less attractive.
Elon Musk’s comments over the weekend that Bitcoin and rival token ether “seem high” seemed to trigger the final move down. The Tesla boss played a huge role in the cryptocurrency rally, and his words carry weight with many Bitcoin enthusiasts.
Craig Erlam, senior market analyst at currency firm Oanda, said, “The fall that has occurred since then shows how wild an instrument is, how overbought it has become, and how influential the Tesla CEO is now in the room.”
Treasury Secretary Janet Yellen added caution on cryptocurrencies, telling CNBC on Monday that Bitcoin “is an extremely inefficient way of conducting transactions and the energy used to process those transactions is staggering”.
“I don’t think Bitcoin … is widely used as a transaction mechanism,” she said. “As far as it is used, I fear that it is often used for illicit finance.”
The price of ether (ETH) also fell Tuesday, with the Ethereum network currency falling 8.9% to $ 1,557. The XRP fell around 15% while Binance’s coin was around 13% lower.
Pankaj Balani, executive director of the crypto derivatives exchange Delta, said the downward correction in Bitcoin and other currencies had come.
“Some of the leverage has been removed, but the volatility should persist for a few sessions, followed by a consolidation in BTC and ETH prices before the next surge.”