NEW YORK, 23 Dec 2017:
Bitcoin plunged by 30% to below US$12,000 yesterday as investors dumped the cryptocurrency after its sharp rise to a peak close to US$20,000 prompted warnings by experts of a bubble.
After falling to as low as US$11,159, it recouped some losses to trade above US$14,000 on the Bitstamp platform, down 9% on the day.
It is down around 25% this week, its largest weekly loss since April 2013.
It capped a brutal week that had been touted as a new era of mainstream trading for the digital currency when bitcoin futures debuted on CME Group Inc, the world’s largest derivatives market on Sunday.
Yesterday’s fall bled into the US stock market, where shares of companies that have lashed their fortunes to bitcoin or blockchain – its underlying technology – took a knock.
Long Blockchain Corp, Overstock.com Inc, Riot Blockchain Inc and Marathon Patent Group Inc lost between 2% and 15%.
The biggest and best-known cryptocurrency has risen around 20-fold since the start of the year, climbing from less than US$1,000 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 it has fallen each day since.
In the futures market, bitcoin one-month futures on Cboe Global Markets were earlier halted due to the steep price drop, while those trading on the CME hit the limit down threshold.
“The crypto markets have experienced several flash crashes over the past few years but we do believe there has been some overvaluation in the market, particularly over recent months,” said Jamie Burke, chief executive officer at venture capital firm Outlier Ventures.
“It’s much more likely this is a natural correction following over-exuberant market sentiment.”
Mike Novogratz, the former macro hedge fund manager at Fortress Investment Group, told Bloomberg he had halted plans to launch a crypto-currency hedge fund. “We didn’t like market conditions and we wanted to re-evaluate what we’re doing.”
His Galaxy Digital Assets Fund was due to start on Dec 15, but he called clients on Dec 12 and told them he had changed his mind, Novogratz said in an interview with Bloomberg.
Novogratz told Reuters in November he hoped to raise about US$500 million, making it the largest fund of its kind.
– Reuters