Cryptocurrency as an asset class is alive and well: Loop's Gibson

Kourtney Gibson, Loop Capital Markets president, and the rest of the ‘Halftime Report’ team discuss how they’re thinking about the volatility in the crypto space. Subscribe to CNBC PRO for access to investor and analyst insights on crypto and more:

The dramatic pullback in bitcoin and other cryptocurrencies comes as a flurry of negative headlines and catalysts, from Tesla CEO Elon Musk to a new round of regulations by the Chinese government, have hit an asset sector that has been characterized by extreme volatility since it was created.

The flagship cryptocurrency fell to more than three-month lows on Wednesday, dropping to about $30,000 at one point for a pullback of more than 30% and continuing a week of selling in the crypto space. Ether, the main coin for the Ethereum blockchain network, was also down sharply and broke below $2,000 at one point, a more than 40% drop in less than 24 hours.

The recent slide is a reversal from the dramatic rise that started in the second half of last year. The price of bitcoin is still up more than 200% since September, the product of a dramatic bull rally sparked in part by hedge fund managers, banks and other companies appearing to embrace cryptocurrency.

“A lot more people own crypto. Crypto has seeped into pockets all over our society and you had a confluence of events — a combination of Tax Day, Elon Musk tweets, whatnot, where you started breaking down the positivity in the price action, and now we’ve got a liquidation event,” longtime bitcoin bull Mike Novogratz said Wednesday on CNBC’s “Squawk Box.”

Institutional support retreats
Part of the reason for bitcoin’s weakness seems to be at least a temporary reversal in the theory of broader acceptance for cryptocurrency.

Earlier this year, Musk announced he was buying more than $1 billion of it for his automaker’s balance sheet. Several payments firms announced they were upgrading their capabilities for more crypto actions, and major Wall Street banks began working on crypto trading teams for their clients. Coinbase, a cryptocurrency exchange company, went public through a direct listing in mid-April.

However, Musk announced last week that Tesla would no longer accept bitcoin as payment, citing environmental concerns. He did suggest on Wednesday that Tesla is not selling its existing bitcoin holding, using emojis on Twitter to say the company has “diamond hands.”

And Coinbase, which surged above $400 shortly after its first trade on April 14, quickly gave up those gains and was down near $220 per share on Wednesday morning. Its direct listing date is also the day of bitcoin’s most-recent all-time high.

Additionally, a new report from JPMorgan said that, based on futures contracts, institutional investors appeared to be moving away from bitcoin and back to gold. Bitcoin is often touted as a potential replacement for the traditional metal as a store of value.

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