LONDON: Bitcoin plunged to its lowest level in 10 days on Thursday, slowing its rapid recovery and causing a sell-off among smaller digital currencies.
Bitcoin, the world’s largest cryptocurrency, fell as much as 13 percent to its lowest level since Nov. 16. It was last down 9 percent to $ 17,074, a sharp correction from its three-year high of $ 19,521 reached Wednesday.
It has recovered about 140 percent this year to just shy of its all-time high of $ 19,666, driven by demand for riskier assets, the perception that it is resistant to inflation, and expectations that cryptocurrencies will gain the upper hand. widespread acceptance.
The second-largest cryptocurrency, ethereum, fell about 13 percent and XRP, the third-largest, slipped more than 20 percent. Both currencies, which tend to move in tandem with bitcoin, hit multi-year highs earlier this week.
The 12-year history of Bitcoin has been peppered with skyrocketing gains and equally steep declines. Its volatility has hampered the use of payouts and has made many larger investors wary.
Sponsors expected that by 2020 a more mature market and fewer retail investors would have reduced the chances of the kind of crisis that followed its 2017 bubble.
Traders cited for the fall the dismantling of accumulated highly leveraged positions as Bitcoin approached its record high, as well as tweets from the CEO of Coinbase, the leading cryptocurrency exchange, expressing concern over rumors of a regulatory crackdown.
“There has definitely been a sense of euphoria in the markets for the past few days,” said Joseph Edwards of cryptocurrency brokerage Enigma Securities. “This mostly feels like a reaction to that – the overlevered markets took a little hit and suffered immensely.”
Since 2017 a functioning crypto derivatives market has developed, with overseas exchanges offering highly leveraged positions. In times of tight liquidity, movements in such markets can have a huge effect on the price of bitcoin.
Others cited concerns around speculation by market players about stricter US regulation on how individual investors store cryptocurrencies.
Brian Armstrong, the CEO of California-based Coinbase, tweeted Tuesday that he was concerned about rumors that the United States would clamp down on individual cryptocurrency wallets.
The US Department of the Treasury did not immediately respond to a request for comment sent outside of business hours.
Bitcoin has reacted sharply in the past to regulatory crackdowns by US authorities.
Last month, US prosecutors filed criminal charges accusing four founders and executives of crypto derivatives exchanges BitMEX of evading rules designed to stop money laundering.
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