Bitcoin’s wild ride might get wilder

Currency loses 9.5 per cent of its value after free fall in Asia; experts see bubble

NEW YORK — What’s a bitcoin worth? Lately nobody knows for sure, but after a wild ride on Friday, it was worth a good deal less than it was Thursday.

After losses over the past few days, the digital currency fell as much as 30 per cent overnight in Asia, and the action became so frenzied that the website Coinbase suspended trading. It later made up much of that ground, and slumped 9.5 per cent to $14,042 US Friday, according to the tracking site CoinDesk.

Experts are warning that bitcoin is a bubble about to burst, but things might get crazier before it does: A lot of people have heard of bitcoin by now, but very few people own it.

“Bubbles burst when the last buyers are in,” said Brett Ewing, chief market strategist for First Franklin. “Who are the last buyers? The general public, unfortunately.”

Ewing said 40 per cent of bitcoin belongs to 1,000 people, and hedge funds and other major investors are going to start buying it soon. But those funds might buy bitcoin and also protect themselves by placing bets that it will fall. Retail investors might just buy it, only to see it fall.

“I think investors should approach it with caution, and I think many people will dive into it not understanding what it is,” he said.

As bitcoin skyrocketed this month, the volume of trading was unprecedented as investors hoping to catch a ride up piled in. Prices have risen so fast, Friday’s decline returned the price of bitcoin only to where it was trading two weeks ago.

The volatility has created a circus-like atmosphere. Some companies that have added the word “bitcoin” or related terms to their names to get in on the action.

Long Island Iced Tea Corp. until this week had been known for its peach-, raspberry-, guava-, lemon- and mango-flavoured drinks. On Thursday, the company announced a radical rebranding. It’s changing its name to Long Blockchain Corp., shifting its primary focus from iced tea to “the exploration of and investment in opportunities that leverage the benefits of blockchain technology.”

Blockchain is a ledger where transactions of digital currencies, like bitcoin, are recorded.

Shares in Long Island Iced Tea soared 200 per cent in one day.

Like investors, the Hicksville, New York, company has hitched a ride on a currency that raced from less than $10,000 US at the end of November to almost $20,000 on Sunday.