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Bitcoin dropped almost 7% for a short while a day after an historic surge past $100 000 led some traders to hedge for a retreat.
The digital asset fell as low as $92 144 on Friday before steadying at $97 851 as of 6:05 a.m. in London. Volatility hit the wider crypto market too amid a hiatus in a rally fueled by President-elect Donald Trump’s embrace of the sector.
Demand has ticked up for bearish wagers such as put options, which provide the right to sell at a predetermined price in a set period. Some of the most notable activity was for puts with strike prices of $95 000 and $100 000, according to Amberdata. Demand for puts in the $75 000 and $70 000 range also increased.
“Although it feels like we’ve still got room to run, investors taking some profits off the table is expected,” said Josh Gilbert, market analyst at eToro. “If we look back at previous cycles, it’s not unusual to see 20% to 40% drawdowns in the Bitcoin price during bull markets.”
Bitcoin, the largest digital asset, pierced the US$100 000 price level on Thursday on optimism that Trump’s pick of a crypto proponent to be the next head of the US securities regulator will push the market further into the mainstream.
Trump has vowed to undo a Biden administration clampdown on digital assets and turn the US into the global home of crypto. The Republican even backed the idea of a strategic national Bitcoin reserve, a controversial idea that former US Treasury Secretary Lawrence Summers called “crazy.”
Late Thursday in the US, Trump posted on Truth Social that David Sacks will be the White House czar for artificial intelligence and the cryptocurrency industry. “He will work on a legal framework so the Crypto industry has the clarity it has been asking for, and can thrive in the US,” Trump said.
The president-elect’s support for virtual currencies is underpinning sentiment, buttressed by US$33 billion of net inflows into US Bitcoin exchange-traded funds this year. At the same time, the token’s 45 percent advance since Election Day on November 5 raises the question of whether the rally is due a breather. – Bloomberg
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