The recent Bitcoin rally came to an abrupt halt on Wednesday as the cryptocurrency’s price began to drop on rumours of new regulation.
The cryptocurrency’s price reached US$16,285 around 12:30 p.m. on Nov. 26, a sharp dip from the US$19,374 it was sitting at around 9:00 a.m. the day before, according to CoinDesk. (All following amounts are also in U.S. dollars).
This followed a low of just under $5,000 in mid-March, and Bitcoin last hit an all-time high in December 2017 when the price reached $19,783.
The recent sell-off was triggered by a tweet from Brian Armstrong, CEO of Coinbase, a San Francisco-based cryptoexchange. The tweet concerned rumours that Washington was planning new regulation around digital wallets — a software system used to store cryptoassets such as Bitcoin.
“We all know that Brian is exceedingly well plugged-in,” says Fred Pye, president and CEO of Toronto-based 3iQ Corp., which manages The Bitcoin Fund. “So, that was enough to pull back the price of Bitcoin in the short term.”
Yet, Pye notes that such a drop should also be seen as part of the natural investment cycle of any asset class.
“I think people have to expect [that] when any asset class runs up as strong as bitcoin has run up in the last three months it’s natural for a consolidation, a pullback,” says Pye. “It’s a perfectly normal retrace.”
Pye expects the price of Bitcoin to continue to move between $16,000 and $20,000 for the next couple of months, before starting to climb to its next plateau.
“Next stop is 50 [thousand] probably,” says Pye.