money

Bitcoin risks crashing to US$900 if dot-com mania is any guide

A bitcoin sign is held outside Hong Kong's first bitcoin retail store during its opening, in Hong Kong February 28, 2014. — Reuters picA bitcoin sign is held outside Hong Kong's first bitcoin retail store during its opening, in Hong Kong February 28, 2014. — Reuters picNEW YORK, Feb 13 — Bitcoin is heading lower — much lower — if the go-go years of the dot-com bubble are any indication.

Already slashed by more than half since hitting a record near US$20,000 (RM79,000) in December, the cryptocurrency could plunge a further 90 per cent in an environment of unsustainably growing supply, according to Bloomberg Intelligence commodity strategist Mike McGlone. Using Amazon.com Inc and the Nasdaq Composite Index’s spectacular rise and retreat at the turn of the millennium as a proxy, he said the currency could plunge to US$900.

“I spend a lot of time reading about this, and the more research I do, the more bearish I get,” McGlone said in an interview. “It’s very similar to these Internet companies we saw in the late 90s.”

While the creators of Bitcoin intended to limit supply to 21 million coins, forks mean that there are already more than 50 million outstanding coins based on the original blockchain. There’s also nothing preventing rivals from spawning an infinite amount of clones, he said. The number of tradable cryptocurrencies jumped 120 per cent in the past year.

“Parabolically increasing supply is the primary limitation to cryptocurrency market-price appreciation,” McGlone said. “There’s strong gravitational pull toward US$900, the average price since inception and the start of 2017.” — Bloomberg

MORE ON MMOTV