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Bitcoin plunges by 30% to below $12,000, worst weekly loss since 2013

The cryptocurrency has risen around twentyfold since the start of the year, climbing to over $20,000 on exchanges

Reuters  |  New York | London 

Bitcoin

plunged by 30 per cent 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 per cent on the day. It is down around 25 per cent 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 when futures debuted on CME Group Inc, the world's largest derivatives market on Sunday.

Friday's fall bled into the US stock market, where shares of companies that have lashed their fortunes to or blockchain - its underlying technology - took a knock. Long Blockchain Corp, Overstock.com Inc, and lost between 2 per cent and 15 per cent.

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, one-month futures on were earlier halted due to the steep price drop, while those trading on the CME hit the limit down threshold.

"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 firm

"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 December 15, but he called clients on December 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 kind.

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 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 US 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 spin-off hours before it announced support for it.

On Friday, said it had temporarily suspended buying and selling of due to high traffic.

CRYPTO-RIVALS

As some rival 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 rose 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 there had also been moves out of into Cash, a clone of the original cryptocurrency. Oanda does not handle trading in

"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 of futures over the last two weeks has given the some perceived legitimacy, many policymakers remain sceptical.

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.

First Published: Sat, December 23 2017. 10:08 IST
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