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Bitcoin gave up much of its weekend trading gains when critics debated whether the blockchain were overheated. Prices fell as much as 8.2% during the European Session, dropping down to about $53,000.

The world’s largest cryptocurrency has been on a run this month, fuelled by transactions from Tesla and retail investors who claim that bitcoin is an enticing option to gold and the dollar.

By February alone, Bitcoin is up more than 60 percent, triggering comments that the run-up is unsustainable. The digital token hit a new all-time high on Sunday and was close to over $59,000.

 

It is commonly suspected that volatile weekend fluctuations are driven by individuals selling cryptocurrencies at home. So it’s also likely that prices dropped on Monday as retail crypto traders, following regular business hours, replied to Elon Musk’s Saturday tweet that bitcoin prices “seem high.”

“Mostly it is down to a massively long speculative market, combined with Elon Musk saying it looks a bit overdone,” said Jeffrey Halley, senior analyst at Oanda Corp.

Meanwhile, JPMorgan Chase & Co. strategists have warned of Bitcoin’s decreasing liquidity. Strategist Nikolaos Panigirtzoglou wrote in a note on Friday that the liquidity of the digital coin was smaller than that of the S&P 500 index and gold, suggesting “even small flows can have a large price impact,” he wrote.

“It should go without saying that new investors to Bitcoin should be prepared for major volatility and for prices to drop suddenly and as sharply as they have risen,” according to Neil Wilson, chief analyst at Markets.com. (Bloomberg)

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