Bitcoin prices are coming down from record highs, briefly falling below $30000 on Monday. The cryptocurrency rose to an all-time high over the weekend, breaking the $34000 mark.
Jason Deane, an analyst at quantum economics, an encryption consulting firm, said: "the most likely explanation for the correction is that some traders sell bitcoin to make profits in the short term, but given the current market sentiment towards bitcoin, any correction may be short-lived."
In terms of market value, bitcoin is the largest cryptocurrency in the world. It has a historic market last year, up more than 300%. Bitcoin, founded in 2009, is a decentralized digital currency that has no demand for any single authority, such as a central bank.
Now, in the face of unprecedented stimulus measures taken by the government to deal with health incidents, investors regard bitcoin as an inflation hedging tool similar to gold. Some institutional investors showed great interest in bitcoin last year and have allocated part of their assets to the cryptocurrency.
"It's undeniable that bitcoin has proved to be a mature top asset, and its value has risen as more and more institutional investors are optimistic about bitcoin," said Eric demuth, chief executive of bitpanda, a digital asset broker
However, investors who are skeptical of the currency still think that bitcoin is a speculative asset with no intrinsic value. It is a market bubble and is likely to burst at some point.
Bitcoin's performance in 2020 is reminiscent of its crazy rise to nearly $20000 in 2017 and a sharp correction the next year. However, proponents of the cryptocurrency say its recent rally is different from that in 2017 because it was driven by institutional demand rather than retail speculation.