Bitcoin's $14,000 gains vanish following exchange outage

The virtual currency marked a six-month surge on Wedneday

Cryptocurrency mining rigs at a Bitfarms facility in Saint-Hyacinthe, Quebec, Canada. An outage at an exchange foiled bitcoin's recent surge. Bloomberg
Cryptocurrency mining rigs at a Bitfarms facility in Saint-Hyacinthe, Quebec, Canada. An outage at an exchange foiled bitcoin's recent surge. Bloomberg

Bitcoin’s rise was meteoric this week - and its decline has been just as swift.

It’s easy come, easy go in the crypto world, where a frenzy over Bitcoin pushed its price to nearly $14,000 on Wednesday, its highest level since January 2018. The largest digital asset then reversed course in a matter of minutes after a prominent cryptocurrency exchange reported an outage. The retreat accelerated on Thursday and put the coin’s price back to nearly the same level as just five days ago.

The jump in prices brought back memories of the crypto bubble that burst at the end of 2017 when Bitcoin and other cryptocurrencies - beset by regulatory setbacks and fraud-related issues - fell from grace. Bitcoin’s price, for instance, languished around $3,600 just six months ago.

Crypto bulls were heartened this year after numerous Wall Street mainstays showed increased interest and wider acceptance of cryptocurrencies and their underlying blockchain technology, helping to push prices higher. Things turned parabolic earlier this month when Facebook unveiled plans for its own digital currency -- many proponents cited the move as long-sought validation of the potential digital assets have to drastically alter the global financial system.

But Thursday’s reversal prompted one of Bitcoin’s biggest proponents, Mike Novogratz, to lament on not having taken more money off the table before the coin lost nearly all its gains. That may have contributed to its swift demise, according to John Spallanzani, portfolio manager at Miller Value Partners.

It’s a very “tight-knit market,” said Mr Spallanzani. “Most likely Novo hitting bids spread like wildfire.”

Bitcoin dropped as much as 19 per cent on Thursday, paring the loss to 16 per cent at the end of the day. It was up 4.2 per cent to $11,137 as of 10:50am in Hong Kong on Friday. Volatility is near the highest levels since early 2018, when the crypto bubble was bursting.

“It seems the crypto market got a bit too hot yesterday and is now cooling down,” wrote Mati Greenspan, senior market analyst at trading platform eToro, in a note. “What an incredible market where the price can crash about 15 per cent in less than an hour and bring us back to the highs of the previous trading day.”

Alternative coins also fell on Thursday, with both Ether and Litecoin dropping 14 per cent. The Bloomberg Galaxy Crypto Index, which tracks some of the largest digital assets, dropped 19 per cent.

Published: June 28, 2019 10:05 AM

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