Bitcoin plummets as doubts grow over sky-high valuation

By Tom Wilson and Tom Westbrook
LONDON / SINGAPORE (Reuters) - Bitcoin fell as much as 17% on Tuesday as investors grew nervous at sky-high valuations, triggering the liquidation of leveraged bets and triggering a sell-off across cryptocurrency markets.
The world's largest cryptocurrency saw its biggest daily decline in a month, falling to just $ 45,000. In troubled trading, it was last down 15.6%.
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The decline brought its losses from a record high of $ 58,354 on Sunday to over a fifth, underscoring the volatility of the emerging asset - though it's still up around 60% this year.
"The types of rallies we've seen are unsustainable and only encourage retreats 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 capitalization, which often moves in tandem with Bitcoin, also fell more than 20% to $ 1,410, a decline of over 30% from last week's record high.
Cryptocurrency markets have been hot this year as large money managers and corporations take the emerging asset class seriously, piling money into the sector, and building confidence among small speculators.
A $ 1.5 billion investment by electric car maker Tesla this month helped push Bitcoin above $ 50,000, but may now put pressure on the company's stock price as it is sensitive to movements in Bitcoin responds.
Rising government bond yields in recent days have hit riskier assets in traditional markets, with caution spilling over into highly indebted Bitcoin markets, said Richard Galvin of crypto fund Digital Asset Capital Management.
According to cryptocurrency website Bybt, exchanges popular with cryptocurrency investors in Asia, including Binance and Huobi, accounted for about 70% of leveraged bet liquidations in the past 24 hours.
Bitcoin's losses were "compounded by the liquidation amount over the past 24 hours," said Lan Gu of Alameda Research, a crypto trading company.
The rapid growth of the cryptocurrency in recent months has led governments and financial regulators to demand stricter regulation.
U.S. Treasury Secretary Janet Yellen said Monday that Bitcoin was extremely inefficient at conducting transactions and a highly speculative asset.
Bitcoin's high volatility, according to critics, is one of the reasons why it has so far failed to gain broad appeal as a means of payment - an expectation that has in part fueled its rally.
Analysts said that with few fundamental factors by which to judge the value of Bitcoin, key price levels would play a big role in determining the direction of crypto markets.
"It's the big numbers that have proven to be points of support and resistance," said Michael McCarthy, chief strategist at CMC Markets in Sydney. "$ 50,000, $ 40,000, and $ 30,000 are the most important chart levels right now."
(Reporting by Tom Wilson in London and Tom Westbrook in Singapore; editing by Jacqueline Wong and Nick Macfie)

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