Bitcoin witnessed a pullback from its recent record high, dipping below US$65,000 (HK$507,000) amidst growing discussions on whether the surge in cryptocurrencies reflects speculative froth within global markets.
According to CoinMarketCap, a platform monitoring cryptocurrency markets, the largest cryptocurrencies dropped to US$64,887 at 3:20 pm yesterday after reaching a fresh all-time peak of nearly US$73,798 earlier.
The rally in global stocks, bonds, and cryptocurrencies in recent months, fueled by bets on looser Federal Reserve monetary policy, is now under scrutiny as investors reassess their positions in light of persistent inflationary pressures in the US.
Bank of America’s chief investment strategist, Michael Hartnett, expressed concerns in a Bloomberg Television interview, pointing out characteristics of a bubble in the record-breaking surge of the technology sector’s “Magnificent Seven” stocks and the all-time highs in cryptocurrencies.
Hartnett highlighted bubble-like traits in prices, the rapid pace of movements, valuations, and the narrowness of assets experiencing gains. These observations contribute to an ongoing debate on Wall Street regarding the vulnerability of many markets to a potential pullback.
While supporters of bitcoin reference approximately US$12 billion of net inflows into dedicated US exchange-traded funds since their launch on January 11 as a fundamental support, concerns loom over a cooling in net ETF inflows to around US$133 million on Thursday, as noted by Sylvia To, head of token partnerships and research at crypto exchange Bullish.
To warned of potential “buyer exhaustion” in the market, which could serve as a catalyst for the bitcoin selloff. Additionally, worries were compounded by a report showing a surge in US producer prices, fueling concerns that the Federal Reserve’s efforts to control inflation may be far from over.
Tony Sycamore, a market analyst at IG Australia, attributed Bitcoin’s decline to the rise in US yields and the strengthening US dollar following the release of hot producer-price inflation data.
