After euphoria gripped Bitcoin investors in recent weeks, sending the cryptocurrency to heights not seen in three years, could it all be crashing down to the hard floor of reality? Falling from as high as $1140, the price of bitcoin is now trading lower than $900.
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The main reason for the recent rally has not changed, with demand from Chinese investors at an all time high. However, once the price broke $800 it seemed to be in a hype cycle that new records were set every day as new general investors piled on when they heard about the surge on mainstream news publications like Bloomberg, CNBC, the New York Times and more. These types of investors are evidently not looking for a long term position and sold at the first sign of a reversal. The trigger seems to be unconfirmed online rumours of a clampdown on virtual capital outflows in China.
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Charles Hayter, the CEO of CryptoCompare.com, comments: “The market has been shifting between two states. With such a rapid rise traders will be looking to take profits and this can sometimes snowball. Nonetheless – whether this is short term correction or a fundamental change in market sentiment is yet to be seen.
Renminbi BTC to the USD markets have been all over the place with $100 premiums to slight discounts as the markets ebb and flow. Volumes have been extraordinary with over 9 million btc exchanging hands on the CNY pair – roughly $10bn USD – this compares to $175 million on the USD pairs.”