Bitcoin plunges 
15% on profit-taking

This article is more than 12 months old

After a heady ascent, price of the virtual currency takes a tumble

Bitcoin plunged as much as 15 per cent to below US$14,500 (S$19,600) on profit-taking yesterday, capping a roller-coaster week that saw it hit a series of record highs amid underlining concerns about its volatility.

The virtual currency, which has no central bank backing and no legal exchange rate, briefly hit a new record of US$17,000 before plunging to US$14,480 in Asian afternoon trade, according to Bloomberg News.

It clawed back some ground and stood at US$16,100 in later trading.

Created in 2009 as a bit of encrypted software, the digital money can be used to buy everything from beer to pizza and is increasingly accepted by major companies such as booking website Expedia.

It has soared more than 50 per cent in just a week and is up from this year's low of US$752 in mid-January.

Analysts have put the jump down to growing acceptance among traditional investors and a decision by US regulators to allow bitcoin futures to trade on major exchanges.

But some, including the US Federal Reserve, have warned against dabbling in bitcoin as it could threaten financial stability, and fears of a bubble have increased as the price soared.

Until now, it has been traded only on specialist platforms, but it will debut on the Cboe Futures Exchange this weekend before hitting the major Chicago Mercantile Exchange on Dec 18.

However, major derivatives brokerages have raised concerns with regulators that the decision to allow it into mainstream markets has been taken too hastily, and analysts are warning any hitch with its launch could spell trouble.

Meanwhile, the nascent bitcoin industry was coming under pressure due to the sudden surge of attention. Major US online exchange Coinbase temporarily crashed; wallet service Trezor, which stores bitcoins, reported issues with its servers; while leading exchange Bitfinex said it had been hit by a cyber attack.

Worries about the cryptocurrency's vulnerability to theft were highlighted again this week when Slovenia-based NiceHash marketplace - which pairs people with spare computing power with those willing to pay to use it to mine for new bitcoin - said it was investigating the theft of 4,700 bitcoins. - AFP