Bitcoin fell on Thursday, halting the rally observed in the past five days. It could not even hold above $ 50,000 as traders failed to maintain the bullish momentum seen after a sudden crash last weekend. The token was down 5.6% in New York.
Other digital assets also fell, with smaller tokens like Monero and EOS hit hardest.
Some analysts claim that BTC is in a neutral band between different moving averages and may form a "head and shoulders" pattern.
"The problem with crypto is, who's going to catch that falling knife?," said Cate Faddis, president and CIO of Grace Capital. "I am very concerned about crypto – honestly, it reminds me of '08 with real estate and it could spread to the entire market."
Chuck Cumello, CEO of Essex Financial Services, also said: "People have to truly understand, in my opinion, what it is. It's a speculative investment. A more mainstream investment doesn't drop 20% on a weekend. That just doesn't happen."
Cryptocurrencies have been showing wild moves over the past few sessions, especially over the last weekend, when many of them have been caught in the broader wave of risk reduction that has also hit US stocks. The reason was the surging inflation, which forces central banks to tighten monetary policy. Bitcoin even ended up losing 21%.
Brett Munster of Blockforce Capital explained that the market has been growing for quite a long time before the crash last weekend, so it is no surprise that quotes fluctuated. But that is not negative unless traders were pushed below their margin requirements. That will lead to forced liquidations, which are usually self-reinforcing.
Still, many crypto fans ignore short-term moves and look at long-term trends. Mike McGlone of Bloomberg Intelligence said Bitcoin is a risky asset that is slowly becoming a digital reserve asset, and this should have a positive impact on its price. He estimates that it could reach $ 100,000 next year, moreso since demand and acceptance are growing, while supply is declining.
"The key question nearing the end of 2021 is whether Bitcoin is too hot," McGlone said. "Our chart shows the crypto fairly priced at about its upward-sloping 50-week moving average."