UPDATE 1-Bitcoin battles for support at $50,000


* Bitcoin briefly drops 10% to $48,575; ether drops 14%

* Pullback follows record high weekend peaks(Updates prices, adds analyst quotes and background)

SINGAPORE, Feb 23 (Reuters) – Bitcoin dropped below $50,000on Tuesday, as investors began to get a little nervous about thedigital currency’s lofty valuation and some leveraged playerstook profit.

The cryptocurrency dropped more than 10%, itslargest daily drop in a month, to hit $48,575. That extends asharp withdrawal of more than 16% from a record high hit onSunday, although bitcoin remains up around 75% for the year.

The drop came despite broad U.S. dollar weakness.

“The market’s rallied almost unimpeded since the beginningof the month and to some degree since the beginning of theyear,” said James Quinn, managing director at digital assetplatform Q9 Capital in Hong Kong.

“Seeing some selling at all is perfectly healthy andnormal,” he said, though adding that some $1.5 billion inliquidation of leveraged positions on crypto exchange Binancewas large and suggested retail investors might be selling.

The cryptocurrency market has been running hot this year asbig money managers begin to take the asset class seriously andhave made large purchases that have driven even more confidenceamong small-time speculators.

A $1.5 billion investment in the crytocurrency by electriccarmaker Tesla this month has helped vault bitcoinabove $50,000 but may now lead to pressure on the company’sstock price as it has become sensitive to movements in bitcoin.

U.S. Treasury Secretary Janet Yellen, who has flagged theneed to regulate cryptocurrencies more closely also said onMonday that bitcoin is extremely inefficient at conductingtransactions and is a highly speculative asset.

Ether, a coin linked to the ethereum blockchain,which often moves in tandem with bitcoin also dropped more than10% and last bought $1,613, down about 20% from last week’srecord peak. Bitcoin bought $49,846 at 0605 GMT.

“They have had a spectacular run and the sharp reversalovernight is really not unexpected,” said Michael McCarthy,chief strategist at brokerage CMC Markets in Sydney.

“But because we’re so lacking in fundamentals, it’s the bigfigures that have proved to be support and resistance points -so $50,000, $40,000 and $30,000 are the key chart levels at themoment. If we see it heading through $50,000, selling couldaccelerate.”(Reporting by Tom Westbrook; Editing by Jacqueline Wong)



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