Monday’s slide is a sign of the wariness of the cryptocurrency’s rapid ascent. Bears have long said bitcoin is in bubble territory, comparing the recent rally to what played out in 2017, when bitcoin plunged by 45% shortly after reaching highs. In 2020, bitcoin surged by 305%.
Will Hobbs, the chief investment officer of Barclays Wealth & Investments, told Insider that he was steering clear of the cryptocurrency because of its wild swings – a view that many money managers share.
Meanwhile, bitcoin has gained institutional support in the past few weeks with announcements from Tesla and Mastercard, among others.
MicroStrategy, the first corporation to directly purchase bitcoin, now owns 70,784 bitcoin, worth more than $3.5 billion. Michael Saylor, the CEO of the enterprise software company, has long advocated bitcoin, viewing the cryptocurrency as a hedge against a devaluation of the US dollar.
On Sunday, Saylor said in a tweet to his half a million followers, “It is only speculation if you don’t understand the technology or why you need it.”
As for Tesla, Dan Ives, an equity analyst at Wedbush Securities, estimated that the electric-car maker had racked up profits of $1 billion on its $1.5 billion bitcoin investment.
“Based on our calculations, we estimate that Tesla so far has made roughly $1 billion of profit over the last month from its Bitcoin investment given the skyrocketing price of Bitcoin, which now tops a trillion of market value,” Ives wrote in a note published Saturday.
Tesla CEO Elon Musk has been a vocal supporter of the cryptocurrency, most recently describing it as “a less dumb form of liquidity than cash.” On Saturday, Musk did acknowledge that the price of bitcoin seemed high.
Many think that bitcoin’s dizzying rally could have been driven by buyers looking to hedge against inflation or simply by people trading the cryptocurrency.
Still, some bitcoin bulls have told Insider that they expect the cryptocurrency to rise even more, to as high as $250,000 in the next three years.