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


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

* Pullback follows weekend record highs (update prices, add analyst quotes and background)

SINGAPORE, Feb.23 (Reuters) – Bitcoin fell below $ 50,000 on Tuesday, as investors began to get a little nervous about the high valuation of the digital currency and some leveraged players made gains.

The cryptocurrency fell more than 10%, its biggest daily drop in a month, to hit $ 48,575. That extends to a sharp retreat of more than 16% from an all-time high on Sunday, although bitcoin continues to climb around 75% during the year.

The drop came despite the broad weakness of the US dollar.

“The market has rallied almost unhindered since the beginning of the month and to some extent since the beginning of the year,” said James Quinn, managing director of digital asset platform Q9 Capital in Hong Kong.

“Seeing some selling is perfectly healthy and normal,” he said, though adding that the sell-off of leveraged positions on the Binance crypto exchange for $ 1.5 billion was large and suggested that retail investors might be selling.

The cryptocurrency market has heated up this year as big money managers start to take the asset class seriously and have made large purchases that have further boosted confidence among small speculators.

A $ 1.5 billion investment in cryptocurrency by electric car maker Tesla this month has helped bitcoin surpass $ 50,000, but may now put pressure on the company’s share price as it has turned sensitive to movements in bitcoin.

US Treasury Secretary Janet Yellen, who has pointed to the need to regulate cryptocurrencies more closely, also said on Monday that bitcoin is extremely inefficient at transacting and is a highly speculative asset.

Ether, a currency tied to the ethereum blockchain, which is often moved in tandem with bitcoin, also fell more than 10% and last bought $ 1,613, 20% less than last week’s record. Bitcoin bought $ 49,846 at 0605 GMT.

“They’ve had a spectacular run and the strong overnight reversal isn’t really unexpected,” said Michael McCarthy, chief strategist at brokerage CMC Markets in Sydney.

“But because we lack fundamentals, it is the big numbers that have proven to be support and resistance points, so $ 50,000, $ 40,000 and $ 30,000 are the key levels on the chart at the time. If we see it heading through $ 50,000, the sale could accelerate. ” (Reporting by Tom Westbrook; Editing by Jacqueline Wong)

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