Bitcoin plunged as much as 15 per cent to below $14,500 on profit-taking today, capping a roller-coaster week that saw the currency hit a series of record highs and 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 $17,000 before plunging to $14,480 in Asian afternoon trade, according to Bloomberg News. It clawed back some ground and stood at $16,100 in later trading.
Created in 2009 as a bit of encrypted software, the digital money been 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 a 2017 low of $752 in mid-January.
Analysts have put the surge 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 has soared.
Until now it has only been traded on specialist platforms, but will debut on Cboe Futures Exchange this weekend before hitting the major Chicago Mercantile Exchange (CME) on December 18.
However major derivatives brokerages have raised concerns with regulators that the decision to allow it into mainstream markets been taken too hastily, and analysts are warning any hitch with its launch could spell trouble.
“If there are any kind of hiccups, we could easily see a scenario where it falls back by 50 percent,” Kay Van-Petersen, macro and crypto strategist with Saxo Bank in Singapore, told AFP. But he still expected the currency to keep rising in the long term, predicting its value would hit $50,000 to $100,000 within 18 months.
The nascent Bitcoin industry was meanwhile 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 cyberattack.
Worries about the digital currency’s vulnerability to theft were highlighted again this week when NiceHash marketplace -- which pairs those with spare computing power with those wanting to create new coins -- said it was investigating a security breach that had resulted in the theft of Bitcoins.
Bitcoin transactions happen when heavily encrypted codes are passed across a computer network.
Bitcoin and other virtual currencies use blockchain, which records transactions that are updated in real time on an online ledger and maintained by a network of computers.