Almost $12,000 wiped off value of bitcoin in weekend ‘thumping’
The value of bitcoin has suffered a “thumping”, losing more than one-fifth of its value at at one point over the weekend before settling below $50,000 (£37,720), only a month after reaching a record high.
The value of the cryptocurrency rose above $68,000 in November and had been predicted to move even higher by the end of the year, amid concern about the value of traditional assets such as gold and government debt.
Some investors and analysts, including the Wall Street bank JP Morgan, have also seen bitcoin as a hedge against inflation, which has begun to take off in large economies including the UK and the US.
But the world’s largest digital currency, which had reached a total market value of $1.1tn before the weekend’s fall, has struggled to maintain momentum since reaching last month’s alltime high.
Bitcoin began to slump markedly on Saturday, falling 22% from $53,890 to a temporary intraday low of $41,967 before recovering ground. On Monday, it was trading at $48,600, its lowest level since October.
The cryptocurrency has been volatile in recent months but remains many times more valuable than it was five years ago, when investors could pick up a single coin for $700.
Analysts at UBS bank blamed the weekend’s slump on various factors including uncertainty before the bosses of cryptocurrency exchanges are due to face questioning from a US congressional committee on Wednesday.
“Crypto is often held up by proponents as a useful portfolio inflation hedge, but wild swings like what we saw this weekend back our view that is more akin to a highly speculative risk asset,” the analysts said. “Regulation remains a key overhang, and this unruly unwind and its impact on retail participants may add to the regulatory conversation.”
Analysts at AJ Bell said bitcoin had endured its “latest thumping”.
As bitcoin fell, so did other “altcoins” such as Ethereum, worth more than $4,600 on Friday evening but down to just above $4,000 on Monday afternoon.
Bitcoin emerged after the 2008 financial crisis, allowing people to bypass banks and traditional payment methods. It has become the
most prominent among thousands of cryptocurrencies.
It relies on “blockchain” technology, which is a shared database of transactions with entries that must be confirmed and encrypted. The network is secured by individuals called “miners” who use high-powered computers to verify transactions, with bitcoins offered as a reward.
There are more than 18m bitcoins, and the mathematical system controlling the generation of new coins – which is decentralised and therefore has no overarching institution such as a central bank – has a hardwired maximum of 21m coins.