Bitcoin Loses a Quarter of its Value in One Day's Trading
Bitcoin lost more than a quarter of its value on Friday as an analyst warned that investors in the cryptocurrency had finally been introduced to the law of financial gravity.
In the latest illustration of bitcoin’s volatility, it slumped to below $11,500 at one point on Friday – touching $11,159 – having started the week at a record high close to $20,000 and in its biggest weekly fall since 2013. However, by 5pm London time it was trading at $12,800 as the currency endured a see-saw day.
It is a sudden reversal of bitcoin’s upward trajectory this year, having started 2017 at $966, and sparked warnings that investors need to beware that they are not risking a rerun of the 17th century tulip bubble.
Bitcoin trades on a number of exchanges and one, Coinbase, was reported to have suspended transactions temporarily while there was also a temporary halt of the new futures contract – which allows investors to take bets on the value of the digital currency at a predetermined point in the future – on the Chicago Board Options Exchange while it waited for the price to stabilised.
Two futures contracts have been launched this month, which were regarded as taking a step towards legitimising digital currencies at a time when regulators are stepping up their surveillance of products linked to the new technology.
Friday’s slump was said to have been fuelled by the founder of another cryptocurrency selling his holdings. Charlie Lee, founder of Litecoin, said he was selling his holdings to avoid a conflict of interest that he faces when talking about the price of the currency which could appear to benefit him.
Jasper Lawler, head of research at London Capital Group, said this decision was probably the “root-cause of the insecurity that’s been felt across the cryptocurrency space”.
“Bitcoin investors were introduced to the law of gravity over the last 24 hours … Long term holders will be used to this level of volatility but newer crypto traders could be permanently put off,” said Lawler.