Bitcoin hit a new record high over the weekend – and then dropped like a stone before traders on the U.S. east coast got out of bed in the morning.
Bitcoin rose above the $ 3,000 mark for the first time on Sunday, another record high in a spring that has been full of them. That put it up 212% on the year – less than six full months of trading. At $ 3,000, it was up about 180% since April 1 alone.
The digital currency traded as high as about $ 3,041 after midnight New York time, then tread water for several hours. Around 6 a.m., though, it started to fall sharply and suddenly. In about half an hour, it dropped in a straight line down to as low as $ 2,664 – an 11% plunge. It currently is down about 7.6% at $ 2,789.
There wasn’t any immediate trigger for the drop, but there were a couple of large trades that may have started a liquidation wave, one trader who goes by the handle BTCVIX noted on Twitter. That may have sparked a round of profit taking.
That’s extremely erratic by normal standards, but it’s hard to apply the usual market labels to moves in bitcoin and the wider world of cryptocurrencies. The markets are still very small and erratic. There are no circuit breakers, no closing bells. So it’s not unusual for bitcoin to go from a record high to a bear market in one day, as happened back in January. In May, the currency fell $ 300 in an hour, and still closed up on the day.
Bitcoin has been rising for a variety of reasons this spring. In Japan, government regulators drew up laws that codified how bitcoin could be used in the nation, a stamp of legitimacy that has seen investors, entrepreneurs and businesses stepping into the world of digital currencies. Japan and South Korea have both embraced bitcoin, with the yen and won now the second and third largest trading markets by volume, after the U.S. dollar. China has slipped to fourth.
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Bitcoin’s myriad rivals and imitators have also been rising. Rival Ethereum has been rising just as sharply as bitcoin – and in fact was still up about 16% on Monday even after bitcoin’s steep drop. Ethereum was trading at $ 8 on Dec. 31. It was trading at $ 391 on Monday morning, and traded as high as a record $ 400. A lot of this is being driven by a new wave of investment coming in via something called initial coin offerings.
Lastly, while bitcoin is not tightly correlated to the happenings in the capital markets, it is not totally unaffected, either. Markets across geographies and assets classes have been rising in lockstep lately, and bitcoin has been swept up in that trend as well.
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