Bitcoin’s scary drop rattles one of its biggest bulls


Bitcoin is getting burned.

The controversial cryptocurrency plunged near the $11,000 mark on Friday, losing nearly a third of its value in a single day, leaving it on track for its worst week since 2013 after a blistering ascent to a peak close to $20,000 on Sunday.

The biggest and best-known cryptocurrency had seen a staggering twentyfold increase since the start of the year, climbing from less than $1,000 to as high as $19,666 on the Luxembourg-based Bitstamp exchange on Sunday and to over $20,000 on other exchanges.

But bitcoin has fallen each day since then, with losses accelerating on Friday. It was recently trading at around $11,049 on the US-based Coinbase exchange, down nearly 33 percent, or $5,360, from a day earlier.

For the week, it was down by as much as 40 percent — its worst performance since April 2013.

“A manic upward swing led by the herd will be followed by a downturn as the emotional sentiment changes,” said Charles Hayter, founder and chief executive of industry website Cryptocompare in London.

“A lot of traders have been waiting for this large correction.”

“With the end of the year in sight a lot of investors will be taking profits and saying thank you very much and closing their books for the holiday period,” he added.

Bitcoin has had a difficult week. As warnings about the risks of investing in the volatile and unregulated market have continued to sound louder — with Denmark’s central bank governor calling it a “deadly” gamble — there have been more worries over the exchanges on which cryptocurrencies are bought and sold.

South Korean cryptocurrency exchange Youbit said Tuesday it is shutting down and is filing for bankruptcy after it was hacked for the second time this year.

Coinbase, which runs one of the biggest exchanges and provides digital “wallets” for storing bitcoins, said Wednesday it would investigate accusations of insider trading, following a sharp increase in the price of a bitcoin spin-off hours before it announced support for it.

While some say the launch by CME and its rival Cboe Global Markets of bitcoin futures over the last two weeks has given the digital currency some perceived legitimacy, many policymakers remain skeptical.

Bitcoin is known to go through wild swings. In November, it tumbled almost 30 percent in four days, from $7,888 to $5,555. In September, it fell 40 percent, from $4,979 to $2,972.

“Trading in bitcoin is akin to gambling, so its movements don’t follow logical patterns,” said Takashi Hiroki, chief strategist at Monex Securities in Tokyo.

“Unlike equities and bonds, it is not possible to calculate expected returns on bitcoin, so buying it becomes a gamble rather than an investment.”