Stack of cryptocurrencies in a circle on the motherboard
© aleksey rezin / 123RF Stock Photo

The recent Bitcoin rally came to an abrupt halt on Wednesday as the cryptocurrency’s price began to drop on rumours of new regulation.    

The cryptocurrency’s price reached US$16,285 around 12:30 p.m. on Nov. 26, a sharp dip from the US$19,374 it was sitting at around 9:00 a.m. the day before, according to CoinDesk. (All following amounts are also in U.S. dollars). 

This followed a low of just under $5,000 in mid-March, and Bitcoin last hit an all-time high in December 2017 when the price reached $19,783.  

The recent sell-off was triggered by a tweet from Brian Armstrong, CEO of Coinbase, a San Francisco-based cryptoexchange. The tweet concerned rumours that Washington was planning new regulation around digital wallets — a software system used to store cryptoassets such as Bitcoin.  

“We all know that Brian is exceedingly well plugged-in,” says Fred Pye, president and CEO of Toronto-based 3iQ Corp., which manages The Bitcoin Fund. So, that was enough to pull back the price of Bitcoin in the short term. 

Yet, Pye notes that such a drop should also be seen as part of the natural investment cycle of any asset class. 

“I think people have to expect [that] when any asset class runs up as strong as bitcoin has run up in the last three months it’s natural for a consolidation, a pullback,” says Pye. “It’s a perfectly normal retrace.” 

Pye expects the price of Bitcoin to continue to move between $16,000 and $20,000 for the next couple of months, before starting to climb to its next plateau.  

“Next stop is 50 [thousand] probably,” says Pye.