Bitcoin is suddenly on pace to have its worst week since 2015
After surging briefly to an all-time high of $3,000, bitcoin has been undergoing a dazzling reversal of late, with the digital currency on track to post its worst weekly decline in more than two years.
Bitcoin BTCUSD, +1.77% has dropped 18.5% over the past week to a value of $2,317, which would mark its steepest weekly decline since Jan. 16, 2015, according to WSJ Market Data Group. Thursday’s more-than-15% drop would represent its largest one-day plunge since Jan. 14, 2015.
Put another way, bitcoin has shed more than $10 billion in market value since the start of the week, based on data from CominMarketCap, which tracks the value of digital currencies. That’s a loss just a little under Twitter Inc.’s TWTR, +0.42% market cap of $12 billion.
The retreat for bitcoin, which fell to an intraday low, down about 20% at $2,076.16, also coincides with a broad selloff in the technology sector XLK, -0.45% which has finished down for four of the past five trading sessions as some of the darlings of the space—Facebook Inc. FB, -0.30% Apple Inc. AAPL, -0.60% Amazon.com Inc. AMZN, -1.26% Netflix Inc. NFLX, -0.29% and Google-parent Alphabet Inc. GOOG, -0.89% , GOOGL, -0.80% known colloquially on Wall Street as FAANG stocks, pullback from or near record heights.
That downshift has helped to yank the Nasdaq-100 index NDX, -0.46% representing the 100 largest tech names, the Nasdaq Composite Index COMP, -0.47% the S&P 500 index SPX, -0.22% and the Dow Jones Industrial Average DJIA, -0.07% lower.
Market bears have increasingly cited the up-until-now unfettered rise of both bitcoin and tech, with the heart of the digital currency, which is based on the so-called blockchain or ledger, being rooted in the very sector that has been recently getting mauled.
As an investment, separate from other fiat currencies like the dollar DXY, -0.03% or the EURUSD, +0.0808% bitcoin has benefited from its position as a decentralized currency, which also offers commodity-like elements, similar to gold GCQ7, +0.12%
But as the asset has risen, Wall Street analysts have sounded alarm bells, with Morgan Stanley as recently as this week, making the case that the cryptocurrency, which is seen as a sort of Wild West of currencies, can justifiably rise no further until its becomes more regulated.
“It is not clear why cryptocurrencies are appreciating so rapidly (apart from the appreciation itself drawing in more speculation against a potentially inefficient ability to sell),” Morgan Stanley warned.
Broader acceptance so far may be a while away, given the Securities and Exchange Commission in March rejecting a pair of funds that would have been underpinned by bitcoin, citing a lack of oversight and transparency.
Bitcoin and other digital currencies, including ethereum, litecoin and others, are underpinned by the so-called blockchain, which is a peer-to-peer network, or ledger, that records and verifies transactions.
Other digital currencies have been under siege as well. Ethereum, and its currency known as ether, threatening to overtake bitcoin in market value, also experiencing a sharp daily downturn, off 10.6%, according to data from digital currency site Coindesk.com. However, over the past week, ether are up 21% and has been mounting a steady ascent.
How long this slump for bitcoin, and for that matter the broader tech sector, will last is anyone’s guess.
However, one bitcoin watcher, Yves Lamoureux, who also predicts that one bitcoin could be worth $25,000, is near-term bearish. He predicts that bitcoin may tumble another 22% to around $1,800.
“We think Bitcoin is worth more like $1,800, according to our model at this stage, and so it’s time to step back and stay liquid,” he said.