Newbies crushed as old-timers hold
NEW YORK: For bitcoin investors, these are the times that try one’s soul.
After surging to almost US$20,000 (RM77,746.12) in December following the introduction of regulated futures contracts in the United States, the world’s largest cryptocurrency has lost more than half its value, plummeting to as low as US$7,614 on Friday, although it later regained some ground and rose 7.5 per cent to US$9,290.15 in New York, according to coinmarketcap.com.
Particularly hard hit have been those who got swept up in the mania just before what sceptics ranging from Jamie Dimon to Nouriel Roubini have labelled as one of the biggest asset bubbles in history began showing signs of deflating.
Selling by “weak hands”, as latecomers are sometimes called across the investing world, contrasts with the view of early advocates pledging to HODL — one frenzied trader’s misspelled entreaty to hold onto the tokens during an earlier rout that’s become the mantra of Bitcoin purists.
Bitcoin’s rise in mainstream consciousness was brought on in part by retail investors’ fear of missing out after viewing the approval of futures as an endorsement by the establishment. As more novice investors jumped in, Bitcoin shot above US$10,000, then US$15,000, then as high as US$20,000 on some exchanges, in a span of only a few weeks.
Some of bitcoin’s biggest backers even warned the euphoria had gotten out of hand. Billionaire Mike Novogratz, who shelved his plans to open a US$500 million cryptocurrency hedge fund and instead wants to build a crypto merchant bank, warned that bitcoin would fall to as low as US$8,000. Thomas Lee of Fundstrat said the cryptocurrency would slide to as low as US$9,000 before shooting back up.
Those highs helped increase the scrutiny regulators as the total market capitalisation climbed to more than US$800 billion at one point last month.
But a steady steam of headlines since about officials cracking down on the market sparked jitters and caused those same retail traders who got in at the highs, to panic sell, hoping to avoid even greater losses.
But the hordes of people wanting to trade crypto, which repeatedly crashed San Franciscobased exchange Coinbase Inc when the market was rallying, are still there. More than one million people have signed up for “early access” to the brokerage app Robinhood Financial’s cryptocurrency section since it said it would offer no-cost trading in digital coins last week.
Meanwhile, many investors who got in earlier aren’t budging.
Bitcoin was worth about US$1,000 at the beginning of last year and about US$450 at the start of 2016, so those who bought then are shrugging off these losses — they’re still up more than 800 per cent.
“It’s just early-year market blues,” said David Mondrus, a long-time crypto enthusiast and chief executive of Trive, a blockchain-based research platform.
“In 12 months, we won’t even remember it.”