Bitcoin Price Rollercoaster Continues as Banks Unsure How to Approach the Crypto

Bitcoin's price has continued to fluctuate, falling by $3,000 in a matter of hours, with big banks divided on how to approach the cryptocurrency.

Bitcoin has hit highs of $39,769 and lows of $36,613 within the past 24 hours, according to CoinMarketCap, as Goldman Sachs, HSBC, and the Bank of England take difference stances on the coin.

Mathew McDermott, Goldman Sachs' global head of digital assets, said in a piece of research on Monday sen by Yahoo Finance: "Bitcoin is now considered an investable asset. It has its own idiosyncratic risk, partly because it's still relatively new and going through an adoption phase."

Goldman Sachs relaunched its cryptocurrency trading desk in March, after a three-year hiatus.

McDermott said bitcoin "doesn't behave as one would intuitively expect relative to other assets given the analogy to digital gold... But clients and beyond are largely treating it as a new asset class, which is notable—it's not often that we get to witness the emergence of a new asset class."

In an interview with Reuters published on Monday, Noel Quinn, the chief executive of HSBC, struck a more cautious tone. He said: "Given the volatility we are not into Bitcoin as an asset class, if our clients want to be there then of course they are, but we are not promoting it as an asset class within our wealth management business."

However, Quinn said that he viewed bitcoin as "more of an asset class than a payments vehicle."

In April, HSBC blocked users of its online share-trading platform from buying stocks in business intelligence company MicroStrategy, because the company has invested heavily in bitcoin, owning tens of thousands of virtual coins.

The Bank of England's Andrew Bailey has also commented on bitcoin recently. During a virtual Treasury select committee hearing on Monday he said, according to CNN: "It's easy to get carried away with financial innovation... It's why I'm skeptical about crypto assets, frankly, because they're dangerous and there's a huge enthusiasm out there."

Last week, JPMorgan analysts told clients that institutional investors are "fleeing" from bitcoin and returning to gold. In 2017, JP Morgan CEO Jamie Dimon called bitcoin a "fraud." In 2019, the bank launched its own cryptocurrency, called JPM Coin.

Bitcoin appears to be sensitive to external forces. Over the past several weeks, for instance, its price has changed following tweets by Elon Musk, and a cryptocurrency crackdown in China.

Despite the uncertainty surrounding it, a rising number of long-term bitcoin holders have been steadily increasing their investment in the cryptocurrency, according to Coindesk, with many of them likely looking to profit by "buying the dip."

A physical representation of bitcoin on dollars
In this photo illustration a visual representation of bitcoin is displayed on a pile of dollar notes. Big banks are divided on the cryptocurrency. Velishchuk/iStock