Another bad week for bitcoin could be a precursor of more pain to come, according to strategists watching the selloff in cryptocurrencies.
Further weakness in its price may bring the US$20 000 zone into view as a downside target, according to Oanda, Evercore ISI and Tallbacken Capital Advisors. Bitcoin fell about 2% to $33 000 as of 11.23am in Hong Kong and is down some 10% so far in June.
The largest cryptocurrency is “dangerously approaching the $30 000 level” amid growing regulatory fears in the US, and “a break of $30 000 could see a tremendous amount of momentum selling”, said Edward Moya, senior market analyst with Oanda.
Bitcoin has dropped about $32 000 from its April record, roiled by a rebuke from billionaire Elon Musk over the energy it requires as well as a renewed regulatory crackdown in China. The ability of US authorities to recover a high-profile bitcoin ransom also dented the idea that it’s beyond government control, which has been an article of faith for some of the coin’s supporters.
Evercore technical strategist Rich Ross and Tallbacken Capital Advisors’ Michael Purves have both flagged the $20 000 area as a potential key level if bitcoin breaks much lower than where it is now.
Others, however, remain confident about the longer-term outlook. For instance, Michael Saylor’s MicroStrategy boosted a junk-bond sale to $500-million from $400-million to fund the purchase of more bitcoin. MicroStrategy has emerged as one of the most bullish public companies on cryptocurrencies.
About a week after bitcoin’s mid-April all-time high, Purves had argued the bullish case looked “highly challenged”.
“How much lower can it go?” Purves asked in his note on Tuesday. “The most obvious answer continues to be a complete retracement of the breakout from $20 000 — in other words, back to $20 000.” — Reported by Eric Lam, (c) 2021 Bloomberg LP