Bitcoin plunges as investors suffer 'reality check'

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Cryptocurrency falls by a quarter as many cash out after its stratospheric rise

TOKYO: Bitcoin prices plunged by a quarter yesterday as investors cashed out just before Christmas after the wildly volatile currency's stratospheric rise in recent weeks.

The precipitous drop comes after a series of warnings by analysts and governments about a bubble that could burst at any moment as investors, many inexperienced, piled into the unit hoping to enjoy some of the eye-watering gains.

The cryptocurrency fell to US$12,191 (S$16,300) from its Thursday price of US$16,563.

It is down almost 40 per cent from its record high of US$19,500 on Monday, according to data compiled by Bloomberg.

The sell-off has bled through to other cryptocurrencies such as Dash, Litecoin and Ripple, all of which were sent plunging.

Mr Stephen Innes, head of trading for Asia-Pacific at Oanda, said investors are having a "reality check", adding: "At the heart of the matter was a frenzied demand for coins with limited supply has now led to unsophisticated investors holding the bag at the top."

At its height, bitcoin had soared almost 30-fold since the start of the year and has moved into the mainstream as two major US exchanges began trading futures in the unit.

And the mania that has swept bitcoin saw a New York beverage company this week announce it was shifting into cryptocurrency-related investments.

Long Island Iced Tea Corp of Farmingdale, which says it currently produces the soft drink, said on Thursday it was changing its name to "Long Blockchain Corp" and would explore investments in the technology underlying cryptocurrencies.

Shares in the firm rose 180 per cent on the tech-rich Nasdaq following the news.

Bitcoin began looking shaky on Wednesday when it took a 15-per cent hit following news that South Korean exchange Youbit had been hacked, leading the firm to say it will close and start bankruptcy proceedings.

The Youbit development came a day after US authorities suspended trading in a popular Bitcoin-related stock, citing concerns about market manipulation.

The Crypto Company's share price had risen 1,700 per cent between the end of September and Monday evening before the Securities Exchange Commission intervened to halt trades until January 4.

There have been numerous warnings about a possible blowout in the Bitcoin market.

Bank of Japan Governor Haruhiko Kuroda said on Thursday that the price surge of the virtual currency was "abnormal", while Singapore's central bank advised investors to "act with extreme caution". - AFP