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After short uptick, digital coins resume selloff as recovery fizzles

The biggest cryptocurrencies resumed their decline on Sunday..

The biggest cryptocurrencies resumed their decline on Sunday, failing to reverse a selloff that began when bitcoin’s unprecedented rally fell short of breaking above $20,000.

A rebound on Saturday fizzled in the afternoon and traders turned pessimistic again, driving bitcoin down 13% in the past 24 hours. The drop among the 10 largest digital coins, ranging up to 19 percent for iota, brings more end-of-year weakness to a market that just had its worst four-day tumble since 2015.

“The West is what’s causing this selloff,” said Mati Greenspan, senior market analyst at Tel Aviv-based online broker eToro, pointing to increased trading in dollars and less in yen. The recent cryptocurrency rally was so steep that investors were prone to take money off the table going into the Christmas holiday season, he said.

The retrenchment isn’t typical for cryptos, which often snap back after a few losing sessions. The last time bitcoin dropped for five successive weekdays was September and, before that, July. While the market has been volatile for most of this year, the rapid run-up has made the recent selloff sting more for digital coin enthusiasts.

Traders have knocked about $160 billion in market value off the biggest cryptocurrencies in about three days, according to CoinMarketCap data. The tumble coincided with several warnings in the past week from financial authorities about elevated risk in holding digital coins.

“The crypto market went to astronomical highs, so it’s got to come back to reality,” Greenspan said. “Something that goes up 150 percent in less than a month is probably going to have double-digit retracement.”

Bitcoin was at $13,288 as of 4 p.m. London time. That’s almost onethird off its record high of $19,511, based on prices compiled by Bloomberg. Ethereum, the No. 2 cryptocurrency by market value, also dropped 13 percent in the past 24 hours, to $651.16, CoinMarketCap data show.

While “nascent blockchain-based cryptocurrencies are rapidly entering mainstream finance,” some of the second-generation digital coins have a better outlook than bitcoin, Bloomberg Intelligence analyst Mike McGlone wrote in comments published Sunday. The whole group is akin to internet-based companies a few decades ago and exchangetraded funds more recently, he said.

“Bitcoin is the crypto benchmark, but not the best representation of the technology,” McGlone wrote. Altcoins “should continue to gain on bitcoin, which has flaws and where futures can be shorted,” he said. Bitcoin’s record high was reached on December 18 hours after CME Group Inc. debuted futures contracts, which some traders said would encourage short position-taking.

‘BITTER LOSERS’

There’s been a string of warnings by regulators for investors in digital coins. “We are seeing a rapid rise in value, which hides the risk of rapid losses,” Bundesbank board member Carl-Ludwig Thiele said in a Euro am Sonntag report. He said there is a wide debate going on about the use of digital central-bank money in a closed system, but that he doesn’t currently expect it’s introduction.

Felix Hufeld, president of German banking supervisor BaFin, advised consumers that trading in bitcoin would produce “bitter losers” and could result in a “total loss,” in an interview with German newspaper Bild.

EU WARNING

That echoed comments three days ago by the European Union’s financial-services chief, Commissioner Valdis Dombrovskis, who asked the heads of the EU’s three financial supervisors to update their warnings to consumers “as a matter of urgency” in light of recent market developments, according to a letter seen by Bloomberg.

In past years, central banks and the commercial lenders they oversee have made strides to curb money-laundering through greater transparency rules, only to see anonymous transactions explode in the nascent cryptocurrency industry — under names like Verge and Zcash. Their admonishments this month haven’t stopped double-digit rebounds.

“Huge rises and sudden, spectacular setbacks wouldn’t surprise me going forward,” ADM’s Ostwald said. “The worry is going to be, at some point, the pips are going to start squeaking. Retail investors losing money will ask, ‘Why aren’t you intervening to help me? And the answer is going to be, ‘Well, this is a casino. On your head, be it.’ ”

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The post After short uptick, digital coins resume selloff as recovery fizzles appeared first on News Wire Now.

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