NEW YORK/LONDON, Dec 22 – Bitcoin plunged by 30
percent to below $12,000 on Friday as investors dumped the
cryptocurrency after its sharp rise to a peak close to $20,000
prompted warnings by experts of a bubble.
After falling to as low as $11,159, it recouped some losses
to trade above $14,000 on the Bitstamp platform, down
9 percent on the day. It is down around 25 percent this week,
its largest weekly loss since April 2013.
It capped a brutal week that had been touted as a new era of
mainstream trading for the digital currency when bitcoin futures
debuted on CME Group Inc, the world’s largest
derivatives market on Sunday.
Friday’s fall bled into the U.S. stock market, where shares
of companies that have lashed their fortunes to bitcoin or
blockchain – its underlying technology – took a knock. Long
Blockchain Corp, Overstock.com Inc, Riot
Blockchain Inc and Marathon Patent Group Inc
lost between 2 percent and 15 percent.
The biggest and best-known cryptocurrency has risen around
twentyfold 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. But it has fallen each day since.
In the futures market, bitcoin one-month futures on
Cboe Global Markets were earlier halted due to the steep price
drop, while those trading on the CME hit the limit down
“The crypto markets have experienced several flash crashes
over the past few years but we do believe there has been some
overvaluation in the market, particularly over recent months,”
said Jamie Burke, chief executive officer at venture capital
firm Outlier Ventures.
“It’s much more likely this is a natural correction
following over-exuberant market sentiment.”
On Friday, Mike Novogratz, the former macro hedge fund
manager at Fortress Investment Group, told Bloomberg he had
halted plans to launch a crypto-currency hedge fund. (https://bloom.bg/2BA9gGN)
“We didn’t like market conditions and we wanted to
re-evaluate what we’re doing,” he told Bloomberg.
His Galaxy Digital Assets Fund was due to start on Dec. 15,
but he called clients on Dec. 12 and told them he had changed
his mind, Novogratz said in an interview with Bloomberg.
Novogratz told Reuters in November he hoped to raise about
$500 million, making it the largest fund of its
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
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 rise in the price of a bitcoin
spin-off hours before it announced support for it.
On Friday, Coinbase said it had temporarily suspended buying
and selling of bitcoin due to high traffic.
As some 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 rose this week, with investors
moving into cheaper digital coins, rather than cashing out of
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 there had 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
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.