Bitcoin pulled back after approaching US$20,000 on Tuesday amid skepticism over the cryptocurrency’s intense rally.

The world’s largest digital asset fell for a second day on Wednesday, dropping 1.2 per cent to US$18,820 as of 7:10 a.m. in Hong Kong. It had reached an intraday record of US$19,914.33 in the previous session. In an interview with Bloomberg Television, Gary Cohn, a former economic chief to President Donald Trump, said the token “lacks some of the basic integrity of a real market” and could eventually fail.

“Part of the integrity of a system is knowing who owns it and knowing who has it and knowing why it’s being transferred,” said Cohn, the ex-chief of Goldman Sachs Group Inc. “The Bitcoin system today has no transparency to it. So there are a lot of people that question, why would you need a system that does not have an audit trail.”

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The Bloomberg Galaxy Crypto Index fell 2.6 per cent on Tuesday.

Marcus Swanepoel, chief executive officer of London-based crypto exchange Luno, said Bitcoin will likely enter the US$20,000 to US$25,000 range before a significant selloff. Then “it’s likely we’d see a 20 per cent to 30 per cent pullback. This is a predictable pattern and there is no reason to not expect it.”

Worth less than US$1 back in 2010 when it was touted as currency for purchases, Bitcoin has amassed proponents who argue that its strictly controlled supply and wider investor base show it’s become a store of value. Critics, however, say this year’s 160 per cent rally is a bubble that can’t be supported by claims that digital assets should diversify portfolios and take flows from gold. On Monday, the token briefly surpassed its high set three years ago.

“Just like we saw in that earlier time period when we got close to US$20,000, it doesn’t take much for that exuberance to abate,” said Keith Buchanan, portfolio manager at GLOBALT Investments. “Given how it’s moved here recently, given how the rhetoric has shifted to ‘one-sided’ instead of a debate, it hearkens you back to that time period when there was a lot of risk that came home to roost, and when it did, the price action was violent.”

The token hit a previous peak of US$19,511 in December 2017 amid widespread elation, only to lose 70 per cent over the course of the following year.

Bitcoin’s recent rally was “likely a result of major institutional investors joining the bandwagon and purchasing a portion of BTC’s limited supply in the midst of a bull run,” said Gunnar Jaerv, chief operating officer of Hong Kong-based custodian First Digital Trust.

--With assistance from Eddie Spence, Vildana Hajric and Joanna Ossinger.