Bitcoin heads for worst week since 2013

Virtual currency Bitcoin tokens are seen in this illustration picture. Picture: Dado Ruvic/Reuters

Virtual currency Bitcoin tokens are seen in this illustration picture. Picture: Dado Ruvic/Reuters

Published Dec 22, 2017

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New York/London - Bitcoin plunged by a

quarter to below $12 000 on Friday as investors dumped the

cryptocurrency in manic trading after its blistering ascent to a

peak close to $20 000 prompted warnings by experts of a bubble.

It capped a brutal week that had been touted as a new era of

mainstream trading for the volatile digital currency when

bitcoin futures debuted on CME Group Inc, the world's

largest derivatives market on Sunday.

Friday's steep fall bled into the U.S. stock market, where

shares of companies that have recently lashed their fortunes to

bitcoin or blockchain - its underlying technology - took a hard

knock in early trading.

The biggest and best-known cryptocurrency had seen a

staggering twentyfold increase since the start of the year,

climbing from less than $1,000 to as high as $19,666 on the

Luxembourg-based Bitstamp exchange on Sunday and to

over $20,000 on other exchanges.

Bitcoin has fallen each day since, with losses accelerating

on Friday.

In the futures market, bitcoin one-month futures on

Cboe Global Markets were halted due to the steep price drop,

while those trading on the CME hit the limit down

threshold.

In the spot market, bitcoin fell to as low as $11,159, down

more than 25 percent on the Luxembourg-based Bitstamp exchange

, its largest one-day drop in nearly three years. For

the week, it was down around a third - its worst performance

since April 2013.

"After its parabolic-like rally, a crash was imminent and so

it has proved," said Fawad Razaqzada, market analyst at

Forex.com in London. "Investors may have also been put off

buying bitcoin at those elevated levels amid repeated warnings

from experts about the way it had climbed near $20,000."

"A manic upward swing led by the herd will be followed by a

downturn as the emotional sentiment changes," said Charles

Hayter, founder and chief executive of industry website

Cryptocompare in London. "A lot of traders have been waiting for

this large correction."

"With the end of the year in sight a lot of investors will

be taking profits and saying thank you very much and closing

their books for the holiday period," he added.

Warnings about the risks of investing in the unregulated

market have increased - Denmark's central bank governor called

it a "deadly" gamble - and there have been worries about the

security of exchanges on which cryptocurrencies are bought and

sold.

South Korean cryptocurrency exchange Youbit said on Tuesday

it is shutting down and is filing for bankruptcy after it was

hacked for the second time this year.

Coinbase, a U.S. company that runs one of the biggest

exchanges and provides digital "wallets" for storing bitcoins,

said on Wednesday it would investigate accusations of insider

trading, following a sharp increase in the price of a bitcoin

spin-off hours before it announced support for it.

CRYPTO-RIVALS

As rival cryptocurrencies slid along with bitcoin, the total

estimated value of the crypto market fell to as low as $440

billion, according to industry website Coinmarketcap, having

neared $650 billion just a day earlier.

But other cryptocurrencies surged this week, with investors

moving into cheaper digital coins, rather than cashing out of

the sector.

Ethereum, the second-biggest cryptocurrency by market size,

soared to almost $900 earlier in the week, from around $500 a

week earlier. Ripple, the third-biggest, has more than

quadrupled in price since Monday.

Stephen Innes, head of trading in Asia-Pacific for retail FX

broker Oanda in Singapore, said that there have also been moves

out of bitcoin into Bitcoin Cash, a clone of the original

cryptocurrency. Oanda does not handle trading in bitcoin.

"Most of it is unsophisticated retail traders getting burned

badly," Innes said on bitcoin's recent retreat.

While some say the launch by CME and its rival Cboe Global

Markets of bitcoin futures over the last two weeks has given the

digital currency some perceived legitimacy, many policymakers

remain sceptical.

Bitcoin is known to go through wild swings. In November, it

tumbled almost 30 percent in four days from $7,888 to $5,555. In

September, it fell 40 percent from $4,979 to $2,972.

Reuters

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