Bitcoin Price Tanks Below $30K, Yellen Comments Could Be One Reason

Bitcoin cryptocurrency
Bitcoin cryptocurrency

The price of Bitcoin plunged below $30,000 on Thursday. The most valuable cryptocurrency experienced a bull run last year and earlier this month it even reached an all-time high of more than $41,000

However, Bitcoin’s price has been sliding lately. Based on data from Coindesk, the cryptocurrency dropped to $29, 467.97 at around 5:00 p.m. PST. The cryptocurrency lost around $100 billion in market value.  Based on that trading price, it lost more than 30% from its record price of $41,940 this month.

There is no particular reason for the cryptocurrency’s latest price decline. Billionaires such as Chamath Palihapitiya and Ricardo Salinas Pliego as well as a number of institutional investors have been bullish on the future of Bitcoin. They predicted that the cryptocurrency will continue to trade higher as many investors see it as a hedge against inflation and political risk.

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What caused the Bitcoin price drop?

There is a possibility that some investors sold their short-term positions in Bitcoin to make a profit. Last week, Guggenheim Chief Investment Officer Scott Minerd said the parabolic rise of Bitcoin is unsustainable in the near term. He encouraged investors to sell now to make money.

Yesterday, Minerd predicted that the Bitcoin price could decline to $20,000. In an interview with CNBC, he said, “We probably have put in the top for bitcoin for the next year or so. We are likely to see a full retracement back to the $20,000 level.”

Another reason could be the statement of Former Federal Reserve Chairperson Janet Yellen, who was nominated by President Joe Biden to serve as Treasury Secretary.

During her confirmation hearing on Tuesday, a day before Biden’s inauguration, Yellen recommended that lawmakers “curtail” the use of cryptocurrencies like Bitcoin due to concerns that they are “mainly’ used for illegal transactions.

Yellen said, “Cryptocurrencies are a particular concern. I think many are used – at least in a transaction sense – mainly for illicit financing.”

“I think we really need to examine ways in which we can curtail their use and make sure that money laundering doesn’t occur through those channels,” she added.

Yellen’s comment followed a statement by European Central Bank (ECB) President Christine Lagarde who said last week that Bitcoin should be regulated globally. She cited the reason that the cryptocurrency is being used in a “totally reprehensible money laundering activity.”

“I think that there are criminal investigations that have taken place…I’m sure will continue to take place that demonstrates it very clearly,” said Lagarde.

The ECB President also pointed out that Bitcoin is not a currency but a “highly speculative asset.” She cited the very obvious reason that Bitcoin’s price is very volatile.

Meanwhile, Chris Thomas, head of digital assets at Geneva-based Swissquote bank suggested that the unwinding of leverage in Asia triggered the latest Bitcoin sell-offs.

 “We saw some selling from institutions, but not significant. The trigger was Asian leveraged positions late in Asian hours. They move the market quite a lot because of the leverage,” explained Thomas to Coindesk. 

On the other hand, Jean-Marc Bonnefous, a partner at investment firm Tellurian Capital, said, The next support level down is the 61.8% Fibonacci retracement at $26,700. That is if the new investors’ allocations do not come in as widely expected to buy the much-awaited dip.”

“As the number of traditional investors and traders entering the Bitcoin market increased in recent months, the price movement has become more technical-driven. Before it was mainly affected by Bitcoin’s supply and demand,” he added.

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