The price of bitcoin is plunging as regulators begin to recognize the real threat alternative currencies pose to their fiat currencies and begin to fire back with restrictions. Between new regulatory scrutiny, and the threat of hacking, bitcoin investors are beginning to find better places for their money elsewhere. The neck-snapping volatility of bitcoin prices must be shocking to some of the late investors who bought when prices were heading up by 20% a day. Steven Russolillo and Kenan Machado report:
The digital currency has now fallen by nearly 60% from a record high of close to $20,000 in December, according to research site CoinDesk Inc. That marks bitcoin’s third biggest drop over the past five years: It fell 76% in the spring of 2013, and 85% from November 2013 to January 2015.
Bitcoin’s sharp swings illustrate just how much the digital currency remains a highly illiquid and volatile investment, particularly relative to stock, bond or currency markets.
In its nine-year history, it has had five peak-to-trough declines of more than 70% apiece, said Charlie Bilello, director of research at New York advisory firm Pension Partners. It fell 94% in less than a month in 2010—and again over a five-month stretch in 2011—but both times bounced back.
The recent decline in some regards feels more severe, as the magnitude of the dollar price drop offers a dose of reality to new investors who poured money into cryptocurrencies during last year’s frenzied rally. Many were drawn to the prospect of investing in currencies outside the control of central banks and governments, but now are having to succumb to market forces.
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