Bitcoin plummets in value, right in time for Christmas

  • 23/12/2017

Bitcoin has plunged to US$13,000 (NZ$18,500) after losing around a third of its value in just five days, with the digital currency on track for its worst week since 2013 after a blistering ascent to a peak close to US$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 US$1000 to as high as US$19,666 on the Luxembourg-based Bitstamp exchange on Sunday and to over US$20,000 on other exchanges.

But bitcoin has fallen each day since then, with losses accelerating on Friday (US time). It fell to as low as US$12,560 on Bitstamp, marking a fall of almost 20 percent on the day.

For the week, it was down around a third - its worst performance since April 2013.

Bitcoin's wild ride in the past year. Photo credit: Coinbase

"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.

Bitcoin is known to go through wild swings. In November, it tumbled almost 30 percent in four days from US$7888 to US$5555. In September, it fell 40 percent from US$4979 to US$2972.

"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."