Bitcoin in new plunge as rally runs out of momentum

Cryptocurrency gives investors jolt with sharp fall Optimists say large price swings are ‘normal’

Bitcoin went into freefall yesterday, its price collapsing from the dizzying heights of nearly US$20,000 (£15,000) earlier this week to about $13,000 as steam appeared to be running out of its year-end rally.

According to Coindesk, the cryptocurrency was trading at $13,155, a fall of more than 30 per cent in five days. Its price tumbled by more than $2,000 in the space of 12 hours.

It comes after a troubled week for Bitcoin, in which a cryptocurrency exchange went bust in South Korea following a cyber attack, knocking its price.

Coinbase, another exchange based in the US, also said it was opening an investigation into sharp price increases.

Neil Wilson, senior market analyst at ETX Capital, said: “Has the bubble finally popped? It’s hard to see the bell tolling just yet. Large price swings have become so normal that it’s hard to decide – we can see this market bounce back in very short order.

“Whilst there have been some hacks, public infighting in the mining community, and regulatory pressure building on some fronts, this is likely to be a simple bout of risk-off selling as investors rebalance towards year-end.

“It looks like it’s time to cash in the gains and spend the winnings on a bumper Christmas.”

Earlier this week, The Chicago Mercantile Exchange (CME) launched its own bitcoin futures trading, following in the footsteps of the CBOE exchange.

Top American regulators approved futures trading in Bitcoin earlier this month and investment banking giant Goldman Sachs is reportedly gearing up to enter the market.

However, while JP Morgan boss Jamie Dimon has branded Bitcoin a “fraud”, Christine Lagarde, head of the International Monetary Fund, said “it may not be wise to dismiss virtual currencies”.

Thetreasuryhasannounced plans for closer scrutiny of the cryptocurrency as part of Euwide plans that will require online platforms that trade in Bitcoin to carry out due diligence on customers and report suspicious transactions.

But that has not curbed excitement over its emerging investment opportunities.

Despite yesterday’s flop, the currency is still well up on the year, rising from around $900 to circa $13,000 yesterday. One analyst commented: “The diverging opinions on Bitcoin and price fluctuations suggest the jury still remains out on whether this is a bubble or not.”

businessdesk@scotsman.com