|A pedestrian walks in front of an office of bithumb, a Seoul-based cryptocurrency exchange, on Jan. 8 when its price topped 40 million won for the first time. Yonhap|
By Lee Min-hyung
With bitcoin's bullish run coming to an abrupt halt this week, investors are urged to remain cautious before jumping into the cryptocurrency craze due to lingering risks over price volatility.
Bitcoin extended an unprecedented super rally that began in December last year, with its unit price exceeding the symbolic and psychologically important level of 40 million won ($36,000) last week. The frenzy came only about 11 days after its price exceeded 30 million won.
But bitcoin started tumbling ― by more than 20 percent in two days ― from Sunday, marking the biggest drop since March of last year.
The global bitcoin craze mostly stems from ample liquidity in the market following the coronavirus pandemic that erupted early last year.
Korea's retail investors have also paid keen attention to investing in the cryptocurrency and stock markets amid the depreciating value of the local currency and prolonged low interest rates.
But one visible difference between the equity and cryptocurrency market is the level of volatility. Those who joined the bitcoin rally belatedly around Jan. 9 are currently at risk of losing their money, with the price curve of the cryptocurrency showing a steep downward trend since then.
Despite the unpredictability and volatility, investors still say the cryptocurrency offers a once-in-a-lifetime opportunity to become rich at a time when the local stock market has already reached its peak and chances remain slim for the main bourse to extend its rally throughout 2021.
Investors are finding it difficult to invest aggressively in the real estate market amid toughened government regulations. This raises the likelihood that investors will continue to view the bitcoin market as a promising investment destination.
"Bitcoin's parabolic rise is unsustainable in the near term," Guggenheim Global Chief Investment Officer Scott Minerd said. "The target technical upside of $35,000 has been exceeded. Time to take some money off the table."
Market analysts attributed the recent downfall of bitcoin to a controversy surrounding Tether, a well-known stablecoin in the U.S. It is now in a legal battle with the New York Attorney General regarding financial documents on its relationship with the cryptocurrency exchange Bitfinex.