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Bitcoin came under pressure, falling 12% on Thursday, amid growing concerns over regulatory oversight.
New US Treasury Secretary Janet Yellen – whose appointment will get a vote from the Senate Finance Committee on Friday – flagged cryptocurrency earlier this week as a means of “illicit financing.” The comments sparked fears that the new administration could impose a crackdown on cryptocurrency.
Any regulation could flush out some of the funds that have been invested in bitcoin in recent months, said Matt Maley, chief market strategist at Miller Tabak.
“If the government comes along and wants to regulate this further, I think some of that excess liquidity is going to move away and move into another area,” Maley told CNBC’s “Trading Nation” Thursday. “It could lead to a pretty big drop, although I think it goes further in the long run.”
This isn’t the only short-term risk for bitcoin, Maley said. After rising more than 200% in the past six months, Maley said it could also be due to a pullback. For technical confirmation of more downsides, Maley is watching if he breaks his Jan 11 lows.
“It would likely take a dip below its intraday lows from that day, which is around $ 30,300, but that would allow a lot of that momentum money, of that short-term momentum money, to grow. bail it out, and that could see a pretty substantial… further drop, ”Maley said.
He identified $ 25,000 as a possible bottom, which would mark a retracement of around 50% from its high in early January. However, he sees crypto as a long term bet that will tend to rise.
“You’re going to see these big moves and big drops in bitcoin, so traders are going to have to be very, very nimble, and long-term investors are going to have to have very strong stomachs,” he said.
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