The cryptocurrency surged, then plummeted, following a long bull run. So, what’s driving the big moves?
January 10, 2017
By Robert Stowe England
In early January, Bitcoin came within a whisker of topping its all-time high of $1,165.89, reached on November 30, 2013. Then it promptly fell off a cliff, plunging by 29 percent between January 4 and January 6, following warnings issued last week by the Chinese central bank to the country’s three largest Bitcoin exchanges.
Where the price will finally stabilize remains an open question, as far as investors, traders and players in the market are concerned. For institutions and hedge funds that invest in alternative assets, the potential advantage that Bitcoin can diversify risk may be offset by such high levels of volatility.
Bitcoin’s recent plunge comes after a long bull run — with occasional hiccups — that began in September 2015, making it the best performer of any currency in each of the past two years, according to a veteran over-the-counter trader for institutional clients. Whereas trading in Bitcoin is still a long way from being a mature market, its ability to survive bouts of sharp volatility is itself a sign of underlying strength, the trader says. “Every day Bitcoin is around, it diminishes the prospects that it ever goes to zero, and at the same time, more and more people start looking at it as a legitimate asset,” he says.
In the past two months Bitcoin’s bull run turned into a stampede, as the price zoomed ahead by $442.29, or 54 percent, according to the CoinDesk Bitcoin Price Index. From a November 3, 2016, close of $687.51, the asset’s price rose to $1,129.87 on January 4. On January 5, after testing its peak price again, it plunged 17 percent in a matter of hours and bounced lower over the next two days, to $819.38 on January 7. The price has been less volatile since last week’s low; it is currently trading near $904.00.
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