Bitcoin continues decline amid rising speculation of 'Bubble'

Bitcoin continued its decline from its recent record peak amidst a growing discussion about whether the surge in cryptocurrency prices reflects speculative excess in worldwide markets.

The largest digital asset experienced a decline of up to 7.2% on Friday, before partially recovering to trade at $67,725 by 7:57 a.m. in New York. Just a day earlier, the token had reached a new all-time high of nearly $73,798.

Both Bitcoin's surge this year and a measure of the top 100 tokens, including Ether, BNB, and Solana, have eased to below 60%.

Rallies in global stocks, bonds, and cryptocurrencies over recent months, driven by expectations of looser Federal Reserve monetary policy, are being reevaluated by investors in light of ongoing inflationary pressures in the US.

Bank of America Corp.'s Chief Investment Strategist, Michael Hartnett, suggested that markets are displaying characteristics of a bubble, citing the record-breaking surge in technology stocks and all-time highs in cryptocurrencies.

This assessment has ignited a debate on Wall Street about the vulnerability of many markets to a potential pullback. For Bitcoin, supporters point to approximately $12 billion in net inflows into dedicated US exchange-traded funds since their launch on January 11, as well as an upcoming reduction in the token's supply growth.

Sylvia To, head of token partnerships and research at crypto exchange Bullish, highlighted a cooling in net ETF inflows to around $133 million on Thursday, suggesting "buyer exhaustion in the market could be a catalyst" for the Bitcoin selloff.

Worries over inflation were further fueled by a report showing a surge in US producer prices, indicating that the Fed's efforts to control inflation may still have a long way to go.

Bitcoin was affected by the rise in US yields and the dollar following the hot producer price inflation data, according to market analyst Tony Sycamore of IG Australia Pty.

The token's decline coincided with signs of increased caution in the derivatives market, which has recently been a focal point for bullish sentiment. Coinglass data showed $668 million worth of bullish crypto wagers liquidated in the past 24 hours, the highest in about two weeks. Funding rates for positions in Bitcoin perpetual futures, popular with speculators, also declined, according to CryptoQuant figures.

"We had a wave of long liquidations which has contributed to exacerbating the selloff," noted Dessislava Aubert, analyst at Kaiko. "Looking at the BTC cumulative volume delta over the past 24 hours, the selling pressure began to accumulate towards the end of Asian trading hours on Binance and Bybit before spreading to other markets."

Stephane Ouellette, chief executive of FRNT Financial, characterized this market activity as "consolidating in the range of all-time highs," suggesting that such volatility around major pivot points is not unusual in crypto.