Bad week: Bitcoin has to take a beating

Bad week
Bitcoin has to take a beating

After the rapid rise, the Bitcoin is slipping sharply. First Elon Musk spoils the mood, then Bill Gates adds. And finally, US Treasury Secretary Janet Yellen criticizes cryptocurrency.

This is probably called an emergency stop: Bitcoin has become around 20 percent cheaper this week and has lost as much as it has not since last March. At that time, a corona-related sell-off on the markets led to a general slide in prices.

Other cryptocurrencies also went down last week – the rapid rally is experiencing a clear setback. The "Bloomberg Galaxy Crypto Index", which tracks the price development of the most important digital currencies, fell by 23 percent. The week had already started unpleasant for Bitcoin: Elon Musk had tweeted that the Bitcoin price seemed too high to him. Gold is better. Then things went downhill.

The Tesla founder is considered a Bitcoin fan. He fueled the rally that drove Bitcoin to around $ 58,000. It really took off when he announced that Tesla had invested $ 1.5 billion in Bitcoin.

Roller coaster rides are not the exception at Bitcoin, but the rule. In addition, the volatility on the markets has increased in the last few days – the prices of stocks, commodities and bonds, for example, fluctuate sharply. The background: fears of inflation.

They are currently the dominant theme in the markets. There are two main reasons for this: On the one hand, it looks like the global economy will recover from the 2020 Corona recession this year. On the other hand, there are fears that US President Joe Biden's $ 1.9 trillion stimulus package may overshoot the target and that the economy will overheat as a result. Both would make a rate hike by the US Federal Reserve more likely.

"You should probably be careful"

The ultra-loose monetary policy of the central banks for years is one of the main reasons for the price records on the stock market. Because there were hardly any alternatives in the search for returns. Rising interest rates usually cause unrest because they make bonds, for example, more attractive compared to stocks.

It is remarkable that Bitcoin is suffering a setback in this environment. Because supporters of the cryptocurrency see it as a protection against inflation and a safe haven in turbulent times. That is why they like to refer to Bitcoin as "digital gold". Gold, however, has proven to be significantly more stable in value in the past week. The course only fell by around three percent.

In addition to the tweet from Musk, there have been other sentiment dampeners for Bitcoin in recent days. US Treasury Secretary Janet Yellen criticized the digital currency as "extremely inefficient" in an interview with the New York Times' Dealbook. And Microsoft founder Bill Gates warned of the pitfalls. "If you are not the richest person in the world, you should not buy Bitcoin," he recommended in an interview with Bloomberg Television. "My general advice would be, if you have less money than Elon, you should probably be careful."