Bitcoin heckled after a new all-time high

Posted on Jan 4, 2021 1:35 PMUpdated Jan 4, 2021, 5:34 PM

After recording a new all-time high at $ 34,366.15 on Sunday, January 3, according to data from Coindesk, bitcoin has experienced a fall as it knows the secret. On Monday, the cryptocurrency star lost as much as 17% during the session, its biggest drop since March, falling below $ 30,000. At the end of the day, the pullback was limited to 5% and bitcoin was still trading above $ 30,000. The currency crossed the 600 billion capitalization milestone on the occasion of its twelfth anniversary.

Rotation to alternative cryptos

Ether, bitcoin’s rival and the second largest cryptocurrency, has climbed to over $ 1,100. “ We are seeing typical movements in the crypto markets where we go from bitcoin to altcoins, and which mainly benefit ether Luno platform’s Vijay Ayyar told Bloomberg.

This kind of rotation usually occurs after a sharp rise in bitcoin When investors turn to other crypto currencies, continues the expert.

Other observers are cautious for the days to come: “ The ether jump is extraordinary, and traders should keep in mind that a correction threatens prices AvaTrade’s Naeem Alam warns. This Monday, in the wake of bitcoin, ether fell back below the $ 1,000 mark.

Arrival of institutions

In 2020, the cryptocurrency markets were driven by a double phenomenon. First, they took advantage of the crisis, gaining the status of a safe haven in the eyes of some investors. Fans of the currency do not hesitate to talk about digital gold despite its high volatility.

On the other hand, bitcoin, ether and other digital currencies have soared due to the influx of money from institutional investors. After denigrating bitcoin, seeing it as a fraudulent asset used to launder dirty money, big funds, banks, asset managers and hedge funds began to take an interest in this new class of assets.

Low liquidity

For them, it is a question of protecting themselves against the fall of the dollar, low interest rates, and the risk of a return of inflation linked to the accommodating monetary policies of central banks. The enthusiasm of institutional investors is also fueled by the FOMO (fear of missing out) or fear of missing the increase.

The appetite of investors drives up cryptocurrency prices all the more as the supply of bitcoins is increasingly scarce. The protocol indicates that never more than 21 million bitcoins will be issued, but already more than 18 million have been. Almost 3 million units having been lost, only 15 million are in circulation. The creation of bitcoins is therefore trickle and sellers are increasingly rare, so that investors are always finding it more difficult to buy them. This illiquidity, coupled with strong demand, is causing prices to rise significantly.

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