Bitcoin takes its traders on volatile thrill ride
It takes a lot to startle fans of bitcoin, the digital gold of the moment. But Wednesday was, well, a lot — a wild run of exuberant peaks and white-knuckled declines that left even diehards breathless.
The dizzying rally in bitcoin, a bull market with few precedents in investing history, was abruptly interrupted by a market outage in the U.S. that seemed to captivate Wall Street even more than the day’s sell-off in high-flying technology stocks.
Only hours after soaring past $11,000 — a price that represents a gain of more than twofold since September — bitcoin plunged nearly 20 percent in less than 90 minutes.
Whether the swoon represented a brief setback or the start of something worse, the wild ride underscored just how volatile the cryptocurrency has become in what some warn could be one of the biggest bubbles of all time.
“Bitcoin trading isn’t for the novice investor,” said John Spallanzani, chief macro strategist at GFI Securities in New York, who does technical analysis on the cryptocurrency. “Corrections are fast and furious, and you can get run over just like in the movie.”
The day started with a touch of frenzy in the air, as the digital currency took its first trip past $10,000 and pop icon Katy Perry was tweeting about her fascination with the rally. But things suddenly seized up during U.S. hours when traffic swelled on online exchanges.
Confusion reigned in the market for hours. Investors fearful of missing out on the frenzy were greeted instead with service outages and delays.
The selling reached furious levels shortly after 1 p.m. in New York, when bitcoin fell back below $11,000 and didn’t stop until $9,009. It hovered just below $10,000 late in the afternoon.
“Issues in the exchanges add to it, without a doubt,” said David Mondrus, CEO of Trive, a blockchain research platform. “When you have a lack of ability to exit, then people dump in order to exit faster.”
For many, the retreat was overdue after bitcoin had rallied 20 percent in just four days in a run-up that drew increased warnings it was headed for a sharp retreat. The cryptocurrency ended September at $4,171.25.
“It’s a bubble that’s going to give a lot of people a lot of exciting times as it rides up and then goes down,” Nobel Prize-winning economist Joseph Stiglitz told Bloomberg Television on Wednesday. “Bitcoin is successful only because of its potential for circumvention, lack of oversight. So it seems to me it ought to be outlawed.”
He joins a host of economists and financiers who’ve denounced the crypto rally as a craze, including most recently Vanguard Group founder Jack Bogle, who advised investors to “avoid bitcoin like the plague.”
Proponents have heard those warnings for years and watched bitcoin’s price rise 935 percent this year alone. And sources said Nasdaq plans to introduce bitcoin futures next year.