Bitcoin records its worst week since March last year as cryptocurrency falls 14% amid fresh doubts over its legitimacy
Bitcoin has recorded its worst week since March last year amid fresh doubts over its legitimacy.
Prices for the crypto-currency have tumbled 14 per cent this week and there are fears it has further to fall.
Bitcoin slipped below $30,000 at one point yesterday before recovering to $32,500. It started the week on $37,500.
The reality check for bitcoin comes after it surged to almost $42,000 over Christmas and the New Year as investors piled into the asset class.
Many commentators dismissed the rise at the time as speculative mania, since the digital coin rose without any clear reason.
Bitcoin started to fall on Tuesday after comments made by former US Federal Reserve chair Janet Yellen – now Treasury secretary under President Joe Biden – who said she wanted to minimise the use of all crypto-currencies, saying they were ‘mainly used for illicit financing’. The comments were a clear statement that the Biden administration will be hostile to bitcoin and ramp up regulation.
Two weeks ago ECB president Christine Lagarde said bitcoin had been used for some ‘totally reprehensible moneylaundering activity’.
And last year money manager Warren Buffett said ‘bitcoin has been used to move around a fair amount of money illegally’. He also quipped that investors should ‘go short suitcases’, as criminals would no longer need them to carry cash.
The concerns stem from the fact bitcoin has no physical form and is not controlled by a centralised authority. This means they are largely unregulated and untraceable.
Joseph Edwards of cryptocurrency broker Enigma Securities said Yellen’s comments had a substantial impact.
But others believe bitcoin is here to stay and that the recent price falls are a blip.
Analysts argue that bitcoin could protect against any upcoming inflation as the world’s central banks have launched huge stimulus programs since the pandemic struck early last year.
Bitcoin has also become a payment method on the High Street with Starbucks and Whole Foods accepting the coins on an app called Bakkt. And last week asset manager Blackrock dipped its toe into the crypto universe, saying cash-settled bitcoin futures are among assets that two funds were permitted to buy.