Air hole for bitcoin after its historic record

A few hours after surpassing its historic record at $69,000, bitcoin suddenly fell by 8%, before climbing back up.

Bitcoin fell sharply on Tuesday evening after setting a new all-time high, weighed down by profit-taking which served as a reminder of how volatile the digital currency could be. Around 8:55 p.m. French time, the cryptocurrency with the largest global valuation (around $1,200 billion) fell 8%, to $62,062 per unit.

Earlier, it even fell below the symbolic threshold of $60,000, to $59,317. This movement followed the new record recorded on Tuesday, at $69,191, erasing the previous mark which dated from November 2021.

“Corrections are part of the game,” commented Michael van de Poppe of MN Trading Consultancy on X (ex-Twitter). “It’s a return to earth.”

At 8:45 a.m. this Wednesday, bitcoin rose above $66,000, showing a loss of 0.31% over 24 hours according to Coinmarketcap.

Bitcoin experienced a meteoric rise after the authorization, in mid-January, of the marketing of a new investment product, an ETF (Exchange Traded Fund), by the American financial markets regulator, the SEC. These ETFs allow investors to profit from fluctuations in bitcoin without having to actually convert their funds into digital currency and with the possibility of withdrawing at any time.

These new investment funds have attracted billions of dollars of investment, thus fueling the rise of bitcoin. This market has also been driven by the prospect of “halving”, a phenomenon which consists of regularly halving the reward of bitcoin “miners”, the operators who “create” digital currency. The next episode of the “halving” is expected in April, which should slow down the pace of bitcoin issuance because the financial incentives will be less. These lower volumes would be likely to support the value of the currency.

“Very high in a very short time”

“Bitcoin has gone very high in a very short time,” responded Matthew Weller of Forex.com in a note. “A marked reflux is logical.”

For Marc Chandler, of Bannockburn Global Forex, bitcoin “is only an instrument of speculation and liquidity, (…) without intrinsic value”, which explains its volatility and the correction which followed the record. Some also saw in this plunge the mark of a movement of risk aversion, also illustrated by the decline of Wall Street or the fall in oil prices.

Previously, bitcoin “was very linked to Nasdaq”, the stock exchange which houses many stocks in the technology sector, “but this is no longer the case”, according to Marc Chandler, who relies on technical analysts of the market. For Matthew Weller, despite the bitcoin downturn, “the long-term trend remains upward. Operators could also see this decline as an opportunity” to buy.