Bitcoin drops as much as 20 percent after a rally past $11kSheetal Sukhija - Thursday 30th November, 2017
NEW YORK, U.S. - Hours after hitting an all-time high, recording a breakneck advance to $11,434, Bitcoin plunged as much as 20 percent.
The rise generated a surge in traffic at online exchanges that led to intermittent outages but then the plunge capped a wild day for the biggest cryptocurrency.
According to analysts, the heaviest selling came amid reports of service outages and delays on some of the largest online exchanges.
While the extent of the problems on platforms such as Coinbase and Gemini remained unclear, several people said that massive spikes in traffic had caused unspecified problems.
In just four days, Bitcoin had rallied 20 percent, topping $10,000 for the first time earlier this week in a run-up that drew increased warnings it was in a bubble.
In September, the cryptocurrency ended at $4171.25.
David Mondrus, chief executive of Trive, a blockchain-based research platform said, “After doubling in such a short period of time, people are taking profits. Issues in the exchanges add to it without a doubt. When you have a lack of ability to exit, then people dump in order to exit faster.”
While such outages are not uncommon at online exchanges, they have earlier led to sell-offs in cryptocurrencies.
One of the biggest platforms, Coinbase, earlier tweeted that traffic was at an all-time high after bitcoin surged to a record $11,434.
James Hughes, chief market analyst at FX broker AxiTrader, said, “As many seasoned traders know all too well, anything that rockets higher, tends to fall down faster when the time comes, and the time will come.”
Experts have warned that the cryptocurrency is extremely volatile and susceptible to major dips but it has fallen by at least 25 percent on three separate occasions in 2017 already.
Garrick Hileman, a research fellow at the University of Cambridge’s Judge Business School said, “What’s happening right now has nothing to do with bitcoin’s functionality as a currency – this is pure mania that’s taken hold.”
Hileman, who last week gave a lecture to the Bank of England on the risks of bitcoin and other cryptocurrencies, also flagged the risk of the whole market collapsing entirely.
He said, “There’s always the possibility that some fundamental cryptographic flaw that we can’t solve craters the whole space, or that regulators unite and decide this represents systemic risk and actually could trigger the next financial crisis.”
Bitcoin was created in 2008 and uses encryption and a blockchain database that enables the fast and anonymous transfer of funds outside of a conventional centralised payment system.