Bitcoin underwent a mini flash crash on Wednesday as its price fell from $59,400 to nearly $57,000 in just five minutes of trading.
Analysts blamed overleveraged long positions for the downside move, with the plunge liquidating about $600 million worth of extended bullish contracts across major futures exchanges. The wipeout followed up with a short sustainability period as Bitcoin maintained a short-term price floor at around $58,000.
Heading into the US session, the flagship cryptocurrency mostly wobbled between profits and losses. Some respite to bulls came from Goldman Sachs, which announced that it would soon offer its first investment services for bitcoin and other cryptocurrencies to clients of its private wealth management group.
Anti-Inflation Narrative Picks Momentum
Mary Rich, global head of digital assets for Goldman’s private wealth management division, confirmed in an interview with CNBC that they would offer clients a “full-spectrum” of cryptocurrency investment services, “whether that’s through the physical bitcoin, derivatives, or traditional investment vehicles.”
The announcement followed a similar move by Morgan Stanley that earlier this month included three bitcoin funds to its list of investment services, enabling its wealthy clients to access the nascent cryptocurrency industry whose valuation has grown thousand-fold during the coronavirus pandemic.
— Squawk Box (@SquawkCNBC) March 31, 2021
Investors flocked to Bitcoin and similar assets owing to their promise to act as hedges against inflation caused by central banks’ ultra-loose monetary policies and governments’ ballooning debt problems. Many, including Tesla, equated bitcoin to a store of value like the US dollar, which lost more than 13 percent of its value last year.
“There’s a contingent of clients who are looking to this asset as a hedge against inflation, and the macro backdrop over the past year has certainly played into that,” Ms. Rich further explained. “There is also a large contingent of clients who feel like we’re sitting at the dawn of a new Internet in some ways and are looking for ways to participate in this space.”
What Bitcoin Analysts Think
Most calls that appeared after the Goldman Sachs story was bullish.
A pseudonymous investment analyst on Twitter noted that Bitcoin’s latest decline appeared as a pause before the cryptocurrency resumes its upward momentum.
“BTC experienced a -26% retrace after rejecting from ~$57500 in February,” he noted. “Then BTC experienced a -18% retrace after rejecting from ~$61K in mid-March. “Key takeaways: BTC is rallying higher after each retrace; [and] it enjoys shallower retraces upon rejection at higher prices.”
Bitcoin was inching back towards $60,000 in the early New York session.