The digital currency has shed more than 80% of its near-US$20,000 peak valuation from late last year
As families in the US celebrated Thanksgiving, Bitcoin investors had little to be thankful for as the digital currency shed almost a third of its value in seven days, marking one of the worst weekly selloffs in its recorded history.
Falling as low as US$3,447.58 on Sunday, the world’s most valuable cryptocurrency managed to breach the US$4,000 mark again later in the day, according to CoinMarketCap data. But it struggled to maintain that recovery on Monday, when it settled back to around US$3,800 as of 2 PM ET.
The Bitcoin space has been challenged by a mass exodus of speculators, as reflected by falling trading volumes, as well as increasing regulatory scrutiny. A split in an offshoot cryptocurrency, Bitcoin Cash, has contributed to the tension. “The prospect of large investors selling bitcoin to cover the risks of a fall in the value of their Bitcoin Cash holdings has hurt sentiment,” reported The Wall Street Journal.
Adding to the worries is an apparent decline in interest from cryptocurrency miners, whose computers work to solve complex equations and generate new digital coins. Citing data from Blockchain Ltd., a cryptocurrency-wallet service and data firm, the Journal said that hash rates — a measure of the computing effort exerted by miners — have fallen sharply in recent weeks.
“Bitcoin’s value is always driven by the intensity of demand and supply,” said Edith Yeung, a partner at early-stage venture fund 500 Startups. “If the miners stop mining, bitcoin will not function…and the overall market will lose confidence.”
So-called altcoins, such as Ripple and Ether, have also fallen in value. According to CoinMarketCap, the total market value of cryptocurrencies has plummeted from above US$800 billion in January to around US$130 billion.
Tony Gu, founding partner at Singapore-based NEO Global Capital — which manages around US$400 million in assets — attributes the rout to “panic.” He remains optimistic in the market’s recovery, with the view that “[m]oney is made when there is blood in the streets.”
Not everyone shares his view. “It’s hard to look at the price charts of the big crypto assets and not cringe,” wrote Fred Wilson, an early bitcoin investor and a partner at New York-based Union Square Ventures. Drawing parallels to the tech bubble burst, he predicted that “things will get worse before they get better.”
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