Bitcoin falls 30 percent, posts worst week since 2013
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[December 23, 2017]
By Jemima Kelly and Gertrude Chavez-Dreyfuss
NEW YORK/LONDON (Reuters) - Bitcoin plunged
by 30 percent to below $12,000 on Friday as investors dumped the
cryptocurrency after its sharp rise to a peak close to $20,000 prompted
warnings by experts of a bubble.
After falling to as low as $11,159, it recouped some losses to trade
above $14,000 <BTC=BTSP> on the Bitstamp platform, down 9 percent on the
day. It is down around 25 percent 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 <CME.O>, the world's largest derivatives market on Sunday.
Friday's fall bled into the U.S. stock market, where shares of companies
that have lashed their fortunes to bitcoin or blockchain - its
underlying technology - took a knock. Long Blockchain Corp <LTEA.O>,
Overstock.com Inc <OSTK.O>, Riot Blockchain Inc <RIOT.O> and Marathon
Patent Group Inc <MARA.O> lost between 2 percent and 15 percent.
The biggest and best-known cryptocurrency has risen around twentyfold
since the start of the year, climbing from less than $1,000 to as high
as $19,666 on the Luxembourg-based Bitstamp exchange <BTC=BTSP> on
Sunday and to over $20,000 on other exchanges. But it has fallen each
day since.
In the futures market, bitcoin one-month futures <0#XBT:> on Cboe Global
Markets were earlier halted due to the steep price drop, while those
trading on the CME <BTCF8> 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."
On Friday, 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. (https://bloom.bg/2BA9gGN)
"We didn't like market conditions and we wanted to re-evaluate what
we're doing," he told Bloomberg.
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 $500 million,
making it the largest fund of its kind.
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A collection of Bitcoin (virtual currency) tokens are displayed in
this picture illustration taken December 8, 2017. REUTERS/Benoit
Tessier/Illustration/File Photo
Warnings about the risks of investing in the unregulated market have increased -
Denmark's central bank governor called it a "deadly" gamble - and there have
been worries about the security of exchanges on which cryptocurrencies are
bought and sold.
South Korean cryptocurrency exchange Youbit said on Tuesday it is shutting down
and is filing for bankruptcy after it was hacked for the second time this year.
Coinbase, a U.S. company that runs one of the biggest exchanges and provides
digital "wallets" for storing bitcoins, said on Wednesday it would investigate
accusations of insider trading, following a sharp rise in the price of a bitcoin
spin-off hours before it announced support for it.
On Friday, Coinbase said it had temporarily suspended buying and selling of
bitcoin due to high traffic.
CRYPTO-RIVALS
As some rival cryptocurrencies slid along with bitcoin, the total estimated
value of the crypto market fell to as low as $440 billion, according to industry
website Coinmarketcap, having neared $650 billion just a day earlier.
But other cryptocurrencies rose this week, with investors moving into cheaper
digital coins, rather than cashing out of the sector.
Ethereum, the second-biggest cryptocurrency by market size, soared to almost
$900 earlier in the week, from around $500 a week earlier. Ripple, the
third-biggest, has more than quadrupled in price since Monday.
Stephen Innes, head of trading in Asia-Pacific for retail FX broker Oanda in
Singapore, said there had also been moves out of bitcoin into Bitcoin Cash, a
clone of the original cryptocurrency. Oanda does not handle trading in bitcoin.
"Most of it is unsophisticated retail traders getting burned badly," Innes said
on bitcoin's recent retreat.
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.
(Reporting by Gertrude Chavez-Dreyfuss in New York and Jemima Kelly in London;
Additional reporting by Shinichi Saoshiro in Tokyo; Editing by Keith Weir and
Susan Thomas)
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