Business

Bitcoin dives again in the nightmare before Christmas

Bitcoin: The price has swung drastically over the past five days
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Michael Bow
22 December 2017

Fears the bitcoin bubble is bursting gained momentum on Friday after prices crashed by more than $2000 (£1496) in a matter of hours.

The crypto-currency plunged by nearly a quarter to as low as $12,192 during trading in Asia, crashing past the $14,000 mark it set yesterday.

Prices are now down 40% since Sunday when the crypto-currency threatened to breach the $20,000 mark.

Rival crypto-currencies were also lower with Bitcoin Cash down 33% to $2383 and Ethereum off 26% to $638.86. The wild price swings will fuel fears about the safety of the crypto-currency

ETX Capital senior market analyst Neil Wilson said: “There’s a fear factor involved with bitcoin because nobody knows where it’s going. It’s hard to know what the price swings mean because nobody understands the asset that well and it’s susceptible to speculation. Once one person starts selling, everyone starts selling.”

Bitcoin futures started trading on America’s giant derivatives exchange the CME at the start of the week, sending prices to a record high of $19,511.

Despite today’s crash, prices are still 1100% higher than a year ago when bitcoin traded at around $1000.

The crypto-currency has captured the imagination of everyone from taxi drivers to currency traders this year, leading to comparison with other speculative bubbles such as the Dutch tulip mania in the 1630s.

Signs of a bitcoin bubble were evident yesterday when shares in a New York-listed company called Long Island Iced Tea rose 290% after rebranding itself as Long Blockchain Corporation.

The small drinks maker, which has never made a profit, said it was changing focus to concentrate on investing in blockchain technology, which backs digital currencies like bitcoin.

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Goldman Sachs added to bitcoin’s respectability as a financial asset by saying it was examining plans to set up a trading desk for digital currency due to client demand. The investment bank will set up the facility in June to make markets in crypto-currencies, Bloomberg reported. The bank’s stance is at odds with another Wall Street giant, JPMorgan, which has dismissed bitcoin, with chief Jamie Dimon calling it a “fraud”.

Bitcoin accounts for about 60% of the crypto-currency market by value. The number of bitcoin that can be created is capped at 21 million and around 80%, or 16.7 million, have been “mined”.

More than 80 dedicated crypto-currency funds have been founded this year, up from 11 last year. But its daily trading volumes of $3 billion pales compared with $5.4 trillion on the FX market.