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Bitcoin Slips as Traders Shrug Off Latest MicroStrategy Buy
Bitcoin’s increasing reliance on purchase announcements for short rallies may not be an entirely healthy trend.
By Muyao Shen
Updated Sep 14, 2021, 12:22 p.m. Published Mar 5, 2021, 5:50 p.m.
Bitcoin was slipping on Friday, down 1.1% even after Michael Saylor's MicroStrategy, which over the past year has become one of the world's biggest corporate buyers of the largest cryptocurrency, announced an additional $10 million purchase.
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Institutional demand for bitcoin from investors and corporations has been a big driver of price gains over the past year: The cryptocurrency has gained 65% this year after quadrupling in 2020.
But this MicroStrategy effect might be wearing off, raising questions over what level of buying – or economic indicators – might be needed to spark a fresh rally, given the cryptocurrency's outsize gains already.
Bitcoin's price popped above $48,000 on Friday after MicroStrategy's announcement before quickly losing momentum. MicroStrategy's shares, meanwhile, were down by 11% at press time.
“In my view, bitcoin’s increasing reliance on purchase announcements for short rallies is not an entirely healthy trend,” said Hunain Naseer, senior editor at OKEx Insights, said.
Bitcoin was changing hands at $47,880 as of 17:29 UTC (12:30 p.m. ET), based on CoinDesk's Bitcoin Price Index.
Read More: MicroStrategy, Its Shares Sinking, Spends $10M to Buy Yet More Bitcoin
“While the foundations of bitcoin remain strong, the coin is under much pressure to return gains to corporate investors who may need to declare earnings for the quarter,” Konstantin Anissimov, executive director at U.K.-based cryptocurrency exchange CEX.IO, wrote in a market report Friday.
Some traders might be more focused on the rapid jump recently in U.S. Treasury bond yields, which might show growing anxiety over future inflation – a key focus for bitcoin traders who say the cryptocurrency might serve as a hedge against price increases.
Read More: Bitcoin Falls 4% as Fed’s Powell Sees ‘Concern’ Over Rising Bond Yields
A better-than-expected February jobs report released Friday by the U.S. Labor Department appeared to send U.S. stocks lower, potentially due to concerns that any response by the Federal Reserve to higher inflation – such as by raising interest rates – might end up stunting economic growth.
“Only after we see signs of a reversal in equities and bitcoin starts taking support from the $52,000 range, can we start considering further upside potential,” said Naseer.
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