Bitcoin takes a plunge after hitting all-time high

23Dec 2017
The Guardian
Bitcoin takes a plunge after hitting all-time high

BITCOIN has tumbled by more than 30 per cent after passing the all-time record $20,000 mark.

The cryptocurrency plunged to $12,560 on Friday morning, following a week of warnings from global investors and high profile hacks on currency exchanges. 

It is widely believed that soaring popularity of Bitcoin Cash, which is a clone that shares its name and many key features, might be to blame.

After one of the largest cryptocurrency exchanges, called Coinbase, began selling the rival on Tuesday, Bitcoin's price dropped 10 per cent.

News of a mini-crash on Thursday evening appears to have exacerbated the problem, with the price dropping $2,000 in twelve hours. 

The drop puts it on the cusp of a bear market, but analysts are in two minds over whether it signifies a bursting Bitcoin bubble. 

The cryptocurrency's staggering rise has become something of a roller coaster ride. While the drop appears significant, analysts have assured those who have invested that it has only dropped to a price seen two weeks ago, and could easily rise again. 

However, it does signify how fickle digital coins can be, with Bitcoin's rivals predicted to flourish in the new year. 

"There are clear divergences happening in the market and the community is not as behind Bitcoin as before, and we could see other rivals catching up quicker in the new year," Neil Wilson, senior market analyst at ETX Capital said.

But Michael Jackson, ex-chief operations officer (COO) of Skype and partner at venture fund Mangrove Capital said: "The vast majority of long term holders of bitcoin are still way in the money and have shown no sign of cashing out.

"We see the exit of short term speculators and we have seen it before. The fundamentals are still in place and there is no reason why the bitcoin ecosystem should not continue to develop."

Now almost a decade old, Bitcoin has struggled to cope with the surge in price and popularity that has seen its price rise from $1,000 at the start of the year. 

Amid its ongoing popularity, many financial sector analysts and banking leaders have warned against buying Bitcoin, with JP Morgan boss Jamie Dimon describing it as “fraud”. 

There have been comparisons to the dotcom bubble of the early 2000s which saw technology stocks lose billions in value and even the alleged “Beanie Baby bubble”.

Others claim that drops like those seen on Friday have happened before and are not a warning sign. In September, after reaching a then high point of more than $5,000, Bitcoin lost almost half of its value in a few days as investors cashed in their profits., the largest Bitcoin storage website, which holds people’s cryptocurrency in digital wallets, claimed to have 10 million customers at the start of 2017.

Bitcoin “billionaires” include the Winklevoss twins, who sued Mark Zuckerberg claiming he stole the idea for Facebook.