The price of Bitcoin has dropped more than 10% since Tuesday to fall below $32,000 for the first time in nearly two weeks. As of press time, the leading cryptocurrency was trading at $31,869.03.
With the pullback, more than $100 billion from the total market value of all cryptocurrencies was shed in the last 48 hours. Falling from about $1.06 trillion to nearly $945 billion.
The plummet is particularly surprising considering that not too long ago, the price of Bitcoin had reached an all-time high of $42,000. The reason for its latest move wasn’t immediately clear. One digital asset manager said it may be a natural correction.
“Corrections are a natural part of any market and are especially natural in the bitcoin ecosystem,” Grayscale CEO Michael Sonnenshein said. “From 2016-2017, we experienced 6 corrections of approximately 30% or more on the way to new highs.”
Meanwhile, Ether, the second-largest crypto token by market value, is also down around 10% from two days ago. This comes after the digital asset hit an all-time high of $1,439 on Tuesday.
A possible explanation for Bitcoin’s price decline is new U.S. Treasury Secretary Janet Yellen warning about the illicit use of cryptocurrencies. The former Federal Reserve chairman said the government would “need to examine ways in which we can curtail their use and make sure that money laundering doesn’t occur through those channels.”
Not all is Doom and Gloom For Bitcoin
Not all is doom and gloom for Bitcoin. The price is still up over 150% in the last three months. There is also optimism among traders after asset manager BlackRock filed separate prospectuses for two funds that may buy Bitcoin futures contracts. The biggest sign yet that institutional investors are flocking to the virtual currency.
Bitcoin bulls have pointed to increased demand from institutional investors for the leading cryptocurrency’s upward momentum in recent months. Investors like Paul Tudor Jones and Stanley Druckenmiller have come out as Bitcoin believers. While some asset managers are starting to add it to their portfolios.
“Who’s to say whether we’ve seen the bottom of the correction, but at Grayscale we know that there continues to be a flurry of demand. Especially from institutional investors who have longer term holding preferences,” Sonnenshein said.
Also helping Bitcoin is the narrative that it offers a store of value similar to gold. In times of unprecedented economic stimulus, which some investors fear will cause a spike in inflation.
With new U.S. president Joe Biden now in office. There is an expectation that he will be distributing for stimulus payments to Americans, which will only boost Bitcoin. The first round of payments resulted in BTC spiking to highs not seen in a few years.
Known for its volatility, BTC skyrocketed close to $20,000 in late 2017 before plunging the following year. It retested that level this past December before doubling in value earlier this month — only to crater back to $30,000.