Bitcoin slumps 15% after hitting new highs

The mania that drove crypto assets to records as Coinbase Global went public last went fired up itself on the weekend, sending Bitcoin tumbling by the most since February.

The world’s biggest cryptocurrency plunged as much as 15 % just days after reaching an archive. It was lower by 9 % at $55,323 at 10.18am in New York (6.18pm UAE time). Ether, the second biggest, dropped up to 18 per cent to below $2,000 before paring losses. Binance Coin, XRP and Cardano each lost a lot more than 12 %. Dogecoin, the token that started as a tale, was the only gainer among the 10 major coins.

The weekend carnage came after a heady week for the industry that saw the worthiness of of most coins surge past $2.25 trillion amid a frenzy of demand for all things crypto in the run-up to Coinbase’s direct listing on Wednesday. The largest US crypto exchange ended the week valued at $68 billion, a lot more than the owner of the New York Stock Exchange.

“With hindsight it had been inevitable,” Galaxy Digital founder Michael Novogratz said in a tweet on Sunday. “Markets got too excited around [Coinbase's] direct listing. Basis blowing out, coins like $BSV, $XRP and $DOGE pumping. All were signs that the market got too one way.”

Dogecoin, which has limited use no fundamentals, rallied the other day to be worth a lot more than $50 billion at one point before stumbling on Saturday. Demand was so brisk for the token that investors trying to trade it on Robinhood crashed the website several times on Friday, the web exchange said in a blog page post.

There is also speculation on Sunday in a number of online reports that the plunge was linked to concerns the US Treasury may crack down on money laundering that’s completed through digital assets.

“The crypto world is waking up with a bit of a sore head today,” said Antoni Trenchev, co-founder of crypto lender Nexo. “Dogecoin’s 100 % Friday rally was ‘peak party’, after the Bitcoin record and Coinbase listing earlier in the week. Euphoria was in the air. And usually in the crypto world, there’s a cost to pay when that happens.”

Aside from the “unsubstantiated” report of a US Treasury crackdown, Mr Trenchev said factors for the decline may have included “excess leverage, Coinbase insiders dumping equity after the direct listing and a mass outage in China’s Xinjiang province hitting Bitcoin miners”.

Growing mainstream acceptance of cryptocurrencies has spurred Bitcoin’s rally, in addition to lifting other tokens to record highs. Interest in crypto increased again after companies from PayPal to Square started enabling transactions in Bitcoin on their systems, and Wall Street businesses like Morgan Stanley began providing access to the tokens for some of their wealthiest clients. That’s despite lingering concerns over their volatility and usefulness as a way of payment.

Governments are inspecting risks around the sector more closely as the investor base widens.

Federal Reserve chairman Jerome Powell the other day said Bitcoin “is a bit like gold” for the reason that it’s more a car for speculation than making payments. European Central Bank President Christine Lagarde in January took aim at Bitcoin’s role in facilitating criminal activity, saying the cryptocurrency has been enabling “funny business”.

Turkey’s central bank banned the utilization of cryptocurrencies as a form of payment from April 30, saying the level of anonymity behind the digital tokens brings the chance of “non-recoverable” losses. India will propose a law that bans cryptocurrencies and fines anyone trading or holding such assets, Reuters reported in March, citing an unidentified senior government official with direct knowledge of the plan.

Crypto organizations are beefing up their top ranks to shape the emerging regulatory environment and tackle lingering scepticism about digital tokens. Bitcoin’s most ardent proponents view it as a modern-day store of value and inflation hedge, while some fear a speculative bubble is building.