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Bitcoin

Bitcoin rebounds after dipping below US$10,000 in unpredictable white-knuckle ride

The cryptocurrency proved volatile on Wednesday, dipping dramatically before raising again - although it’s still down from its mid-December high

PUBLISHED : Thursday, 18 January, 2018, 5:26am
UPDATED : Thursday, 18 January, 2018, 5:32am

Bitcoin’s wild start to 2018 turned breakneck on Wednesday, with the largest cryptocurrency plunging below US$10,000 (HK$78,177) for the first time in six weeks before staging a rally to trade virtually unchanged.

The gyrations took the digital token across a trading range of more than US$2,600 (HK$20,327) over 18 hours. Its tumble to a low of US$9,186 (HK$71,818) pushed a month-long rout past 50 per cent and raised the spectre that last year’s 1,400 per cent rally was giving way to what many considered an inevitable bursting of the bubble. 

Bitcoin rebounded more than US$1,600 (HK$12,509) in the next four hours to trade at $10,850 (HK$84,828) as of 4:25pm in New York (5:25am HKT), according to consolidated pricing data collated by Bloomberg.

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The drama Wednesday was sparked by increased scrutiny from regulators around the world that spread across the cryptocurrency realm in recent days, wiping out more than US$300 billion in value just since Saturday.

Bitcoin’s losses reached US$140 billion (HK$1 trillion) from its record of US$19,511 (HK$152,541) on December 18. It’s still higher by 1,000 per cent in the past year.

Bitcoin was overbought and sentiment was ecstatic. This is an overdue correction triggered by South Korean regulation fears
Ari Paul, chief investment officer of BlockTower Capital Advisors

“Bitcoin was overbought and sentiment was ecstatic,” said Ari Paul, chief investment officer of BlockTower Capital Advisors. “This is an overdue correction triggered by South Korean regulation fears.”

In South Korea, a hotbed of trading, regulators warned they may shut down cryptocurrency exchanges completely after limiting their operations.

China is said to have intensified its curbs on trading of the digital coins, extending restrictions to over-the-counter and peer-to-peer platforms after banning exchanges last year.

In the US, the Securities and Exchange Commission asked at least 15 funds to pull applications this month for bitcoin-related exchange-traded funds.

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That’s left speculators across the globe struggling to determine when or how market watchdogs may rein in an industry that is decentralised and derives much of its value from anonymous ownership.

“We get sell offs like this fairly regularly. I think this one is more pronounced and press-worthy since it is affecting more people and the dollars at stake are greater,” said Joe Van Hecke, managing partner at Chicago-based Grace Hall Trading LLC.

It’s a great time to evaluate which of these coins have staying power … and invest in those
Joe Van Hecke, managing partner at Grade Hall Trading LLC

“It’s a great time to evaluate which of these coins have staying power, actually have utility going forward, and invest in those.”

Souring the mood in the market, cryptocurrency exchange Bitconnect said it’s shutting down after receiving two cease-and-desist letters from state authorities for the unauthorised sale of securities.

It also said it was suffering from denial-of-service attacks.

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Meanwhile, one of the biggest trading platforms, Kraken, was offline for over a day last week as a scheduled update went awry.

In addition, some are blaming part of the rout on the Lunar New Year, as Asian traders cash out their cryptocurrencies to travel and buy gifts for the Chinese Spring Festival holiday that starts February 16 this year.

The sell-off has been amid relatively high trading volume, with around 400,000 bitcoin exchanging hands on Monday, the highest since December 21, according to the latest data on Bitcoinity.org.

It wasn’t supposed to happen that way.

When bitcoin futures started trading last month on CME Group Inc and Cboe Global Markets Inc exchanges, it triggered speculation that there would soon be a range of crypto ETF and mutual fund offerings. That in turn would draw hordes of new investors and lift bitcoin even higher.

Many claims that digital coins represent a bubble have triggered double-digit sell-offs over the past year, often to be followed by rebounds. 

It fell 26 per cent in a week after reaching its peak in mid-December, only to rally 21 per cent in the next 10 days. Since then, its posted only two gains in eight sessions.

Bitcoin’s market value has dropped to about US$170 billion (HK$1.3 trillion) from a peak north of US$310 billion (HK$2.4 trillion).

The December surge began after the US Commodity Futures Trading Commission agreed to allow trading in bitcoin futures. The digital coin is still higher by almost 1,000 per cent from a year ago.

“There are a great many investors that are excited to see bitcoin below US$10,000 as a second opportunity to enter at a price they feared they’d never see again,” BlockTower’s Paul said.