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Bitcoin’s record-breaking rally seems to have hit a wall, with prices looking to finish the week below US$37,000.
After starting the year with a surge that took Wall Street by surprise, the volatile cryptocurrency has been range bound in recent days. Bitcoin dropped as much as 11 per cent to US$34,409 Friday. Over the week, it’s down the most since September.
“Downside risks are always present with Bitcoin and while US$35,000 may provide an interesting test, the only level that really matters is US$30,000,” Craig Erlam, senior market analyst at Oanda Europe wrote in a note Friday. “A break of this could trigger a much sharper correction.”
The massive gains in Bitcoin recently have renewed the debate over whether it’s a real asset class or a speculative bubble. Advocates say cryptocurrencies make sense at a time when central banks are printing money and the market’s infrastructure is rapidly improving. Critics, on the other hand, argue that Bitcoin is another symptom of market froth, with prices prone to manipulation.
Either way, more regulators are starting to take a critical look at the market. The U.K.’s financial watchdog issued a warning this week that consumers betting on cryptocurrencies should be ready to lose everything.
”Cryptocurrencies are not sustainable,” said Peter Branner, the chief investment officer at APG Asset Management. “Bitcoin is not backed by a central bank. It only has a value if people gives it value