(ATF) The bitcoin digital currency continued its wild ride, extending its record-breaking rally over the weekend. It surged past $30,000 for the first time and hit a record high of $34,800 on Sunday before plummeting again Monday.
Bitcoin’s 14% slide on Monday did little to claw back its more than-than 800% advance since since mid-March. Since crossing $20,000 just two weeks ago, the cryptocurrency has seen demand grow as a safe-haven play during the Covid-19 pandemic, akin to gold.
Larger US investors have been attracted by its perceived inflation-hedging qualities and potential for quick gains, as well as expectations it would become a mainstream payments method.
This week, Russian energy giant Gazprom opened a bitcoin mining unit in Siberia, while in the US, the Salvation Army, a Christian charity, said it would accept donations in the cryptocurrency.
"Bitcoin mania is running wild as bearish bets against the dollar rise to the highest levels since 2011," said Edward Moya, senior market analyst at New York foreign exchange brokerage OANDA. "Macro crypto traders and haters of fiat currencies remain blindly ultra-bullish."
The current surge is unusual, said Moya, as in the past bitcoin would see weakness on regulatory concerns. Last week, Coinbase, the largest broker, announced that Ripple Labs' XRP – until recently the world’s third most-traded cryptocurrency – will be suspended, following a US Securities and Exchange Commission lawsuit.
The SEC action against Ripple Labs contends that XRP is really a security and subject to its oversight. Coinbase will cease trading in XRP from January 19.
“We will continue to monitor legal developments related to XRP and update our customers as more information becomes available,” Paul Grewal, Coinbase’s chief legal officer, wrote in a blog post.
Moya said institutional investors could see the crash of XRP as a reminder that bitcoin might be best positioned to handle new regulatory restrictions on cryptocurrency.
Traders said bitcoin's drop on Monday was not unusual for the volatile asset, whose wild price swings have in part prevented it from becoming widely used as a currency.
"It's still an unavoidably volatile asset by its nature," said Joseph Edwards of crypto brokerage Enigma Securities.
"For the most part, this looks like a purely technical move, signalled and caused by short-term euphoria," he added.
Smaller coins that often move in tandem with bitcoin also fell, though not as sharply. Ethereum, the second biggest, dropped 1% after touching a 3-year high of $1,170.
- With reporting by Reuters