The price of bitcoin has tumbled to its 2018 low today and means that those who jumped on the cryptocurrency bandwagon late last year will now be sitting on significant paper losses.
Bitcoin has fallen below $6,500, down to its lowest level since early November 2017, at which point a surge in interest saw its value dramatically increase. At its peak, the cryptocurrency raced to beyond $19,300 a coin as excitement over it reached fever pitch.
US academic research today suggests a major factor in the boom was a small number of owners driving up the price.
Bitcoin price: It has tumbled from $19,300 a coin from its mid-December peak to below $6,500 today
The rising value saw many eager buyers want to join the crypto craze before it was ‘too late’. But those who bought at that peak are now sitting on a 66 per cent loss.
It means that if £10,000 was invested in bitcoin on 17 December 2017, it would now be worth just £3,400.
Many may have piled in after hearing about big returns some early adopters had made and hoped to also turn a quick buck.
It came after the price raced from $1,000 a coin at the start of January 2017 to soar 20-fold before the end of the year. At the start of 2016, the price was $450 a coin.
It is not just bitcoin which has seen prices struggle in recent times. Ethereum is down to $470 a coin, from a 10 January peak of $1,300 while ripple is down to $0.53 from a high of $3.32 and litecoin is $95, down from a peak of $331 in December.
Highs and lows: Bitcoin has fallen to a 2018 low while ethereum is also down vastly compared to its January peak
What next for bitcoin?
After last year’s mania when Bitcoin’s price spiked to almost $20,000, the cryptocurrency took a tumble and interest has drained away.
Now Bitcoin Google searches are down 90%. Is that it for cryptocurrency, or is it time to buy for the long-term when things are quiet?
On this podcast we take a look at who’s buying, holding and waiting for the price to rise again.
The recent falls are thought to be partly caused as a knock-on effect in the aftermath of a major cryptocurrency exchange hack in South Korea.
Coinrail, a popular exchange in the country was breached at the weekend, with a variety of coins swiped by hackers.
The exchange didn’t reveal how much was stolen nor whether larger digital currencies, such as bitcoin, was part of the hack, but it is thought around $28million was taken during the attack.
David Sapper, chief operating officer at crypto exchange Blockbid, said: ‘The recent Coinrail hack shows that the fast-paced, evolving world of cryptocurrency is continuing to hold strong appeal to fraudsters and hackers, which in turns grows the level of risk for the market.
‘With little regulation in place across exchanges and cryptocurrency trading, unauthorised access from external parties on core systems and customer accounts are a potential threat.
‘The more popular an exchange becomes, the harder the platform must perform, thus leaving any potential holes in security open for interception.’
Bloomberg revealed earlier in the week that bitcoin has lost more than $42billion in market value this year, thanks to the hack threat and increased scrutiny.
This loss equates to roughly half the total of the entire cryptocurrency market.
DID YOU INVEST AT THE PEAK?
Did you invest in bitcoin, or any other cryptocurrency at the peak, and are now worried about your investment?
Get in touch: firstname.lastname@example.org
The fall in price comes after an academic paper suggests today that the price of bitcoin was artificially increased last year by a small number of holders.
The paper is by John Griffin, a finance professor at the University of Texas who has a track record for spotting fraud in financial markets.
Alongside graduate Amin Shams, it concludes that a concentrated campaign of price manipulation was likely to have accounted for half the increase in the price of bitcoin – and others – late last year.
Mr Griffin said of the 66 page document: ‘There were obviously tremendous price increases last year, and this paper indicates that manipulation played a large part in those price increases.’
Bitcoin has a market cap of 21million coins.
It is believed around 82 per cent of these coins have already been mined.
Investors will be keeping their fingers crossed that once they have all been mined – a process by which transactions are verified and added to the public ledger, known as the blockchain – the price may start moving north once more.
IF YOU DO BUY INTO BITCOIN
Find out how bitcoin and the blockchain works, so that you have some understanding of the system, the ledger, the major players and the public and private key elements.
Remember bitcoin yields nothing and its main source of value is scarcity. Most bitcoin activity is trading not investing.
Research coin wallets, the digital vaults where cryptocurrency is held, and consider security carefully. Bitcoins have been stolen before, understand how this happened.
Be prepared for extreme volatility. The price can move by 20 per cent in one day and you could easily lose half of your cash in a far quicker time that investing in the stock market.
Consider how you would cash in any gains. There are reports that this has proved hard for some people. A time of market stress could lead to people being locked in and unable to trade.
Read our guide to How to be a successful investor, which looks at the far less high octane world of long-term investing and how to make it a success.
What is bitcoin?
The digital currency that most will be familiar with is free from government interference and can be shared instantly online. It doesn’t rely on trusting one central monetary authority.
The underlying technology is blockchain, a financial ledger maintained by a network of computers that can track the movement of any asset without the need for a central regulator.