Bitcoin losses gather pace, with prices nearing three-week low

[LONDON] Bitcoin closed in on the lowest in three weeks as the cryptocurrency's sizzlying rally gives way to pessimism that prices are too high.

Bitcoin tumbled as much as 8.3 per cent in the European morning, sliding below US$33,000. The largest digital asset has trended lower ever since breaking through US$40,000, and losses have accelerated in the past two days.

While soaring crypto prices fueled a speculative mania among the Robinhood crowd, it's also made professional investors reluctant to buy at the top. Prices are still more than double the levels from early November and some technical analysts have argued that a retracement is overdue.

"Bitcoin has already achieved the fastest-ever price appreciation of any must-have asset," wrote JPMorgan strategists John Normand and Federico Manicardi in a report on Thursday. "Current prices are so far above production costs that mean-reversion lower in returns is a recurring concern." Bitcoin was down 6.1 per cent to US$32,795 as of 11.19 am in London. Prices are on track for their first back-to-back weekly decline since early October.

Chart patterns suggest the market is consolidating within a "bullish pennant" formation, according to Matthew Weller, head of research at Gain Capital Group. A sharp move higher could push prices above US$50,000, while a break lower would point to a deeper retracement below US$30,000, he predicted.

"It would likely take a more severe drop to erase the established uptrend," Mr Weller wrote in a note.

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Despite the selloff, Wall Street hasn't lost interest in the new asset class. On Wednesday, BlackRock filed paperwork to add Bitcoin futures as an eligible investment in two funds, the first time the money manager is offering clients exposure to cryptocurrency.

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