Bitcoin, other cryptocurrencies tumble as investors grow nervous
Bitcoin and other cryptocurrency prices tumbled on Tuesday, after a sharp warning from US Treasury Secretary Janet Yellen that bitcoin was “extremely inefficient.”
Bitcoin plummeted as much as 17% on Tuesday as investors grew nervous at sky-high valuations, triggering the liquidation of leveraged bets and sparking a sell-off across cryptocurrency markets.
The world’s biggest cryptocurrency was facing its biggest daily drop in a month, falling to as low as $45,000. In choppy trading, it was last down 15.6%.
The drop took its losses to over a fifth from a record high of $58,354 hit on Sunday and underscored the volatility of the emerging asset - though it is still up around 60% this year.
“The kinds of rallies we’ve been seeing aren’t sustainable and just invite pullbacks like this,” said Craig Erlam, senior market analyst at OANDA. “It was an extremely overbought market.”
Ether, the world’s second largest cryptocurrency by market capitalisation that often moves in tandem with bitcoin, also dropped more than 20% to $1,410, down over 30% from last week’s record peak.
The cryptocurrency’s rapid gains in recent months have led to calls from governments and financial regulators for tighter regulation.
US Treasury Secretary Janet Yellen said on Monday that bitcoin was extremely inefficient at conducting transactions and was a highly speculative asset.
“It’s an extremely inefficient way of conducting transactions, and the amount of energy that’s consumed in processing those transactions is staggering,” Yellen said in an interview with the New York Times.”
Bitcoin’s high volatility, critics say, is among reasons that it has so far failed to gain widespread traction as a means of payment - an expectation that has in part fuelled its rally.
Why is bitcoin and other cryptocurrencies invalid in Islam?
Most Islamic scholars believe that using bitcoin and other cryptocurrencies as money is unacceptable since digital currencies lack intrinsic value and there is a high risk involved in their trading.
Other reasons Islamic experts cite for invalidating cryptocurrencies is that these currencies lack real ownership and are not backed by any governments.
Research shows that cryptocurrency is hugely volatile and has limits to being called ‘money,’ as it is limited and used for speculation, which is prohibited in Islam.