Bitcoin drops 13% after bullish start to 2021

The action follows enthusiastic buying last week that pushed bitcoin near an all-time high of $42,000. Despite fresh selling, the cryptocurrency is still up 22% so far for 2021, handily beating a gain of 1.8% for the S&P 500
SPX,
+0.55%,
1.6% for the Dow Jones Industrial Average
DJIA,
+0.18%
and 2.4% for the Nasdaq Composite
COMP,
+1.03%.

Fellow cryptocurrencies have also seen a similarly bullish start to the year, with Ethereum’s Ether
ETHUSD,
-13.20%
up 50% and Litecoin
LTCUSD,
-14.83%
gaining 15%. But those assets have similarly seen 16% and 20% drops, respectively, in the past 24 hours.

Institutional investors have been helping to drive the recent rally, and fans of the digital currency are convinced bicoin’s gains could be more sustained than the surge of 2017, which saw prices climb from around $1,000 to $17,000, only to reverse those gains by the end of 2018.

Bitcoin enthusiasts believe the asset could better hold its value this time, after rampant central-bank money printing in 2020 aimed at helping economies recover from the deadly coronavirus pandemic.

The 24-hour bout of selling is nothing more than an overdue “healthy correction,� Naeem Aslam, chief market analyst at AvaTrade, told clients in a note on Monday.

“Bitcoin prices are likely to find their support between $28K to $30K. This is not the time to panic but to look at this opportunity from a more optimistic lens as the bull run is not over yet, and it is still likely to make its journey to the upside,� he said.

In its “The Flow Show� report released last week though, Bank of America , raised the question as to whether bitcoin’s price move represents the “mother of all bubbles.� 

JPMorgan strategists, meanwhile, recently laid out the case for the digital currency to be valued at $146,000 if it can keep pulling investors away from gold 
GC00,
+0.80%
as a haven-like asset.