Bitcoin has delivered a stark reminder of the volatility that has deterred many mainstream investors from the cryptocurrency, dropping heavily in value since the all-time high above $34,000 set on Sunday.
The price of a coin crashed below $30,000 in Monday trading, falling as much as a fifth from that record intraday high. It then recovered some of those losses to recently trade at about $30,100.
Even bitcoin bulls had predicted a retracement after the asset’s most recent surge, as investors look to take profits after a breathtaking run.
The currency increased by as much as a fifth in the first few days of the year, following a more than 300 per cent gain in 2020.
Marc Bernegger, a board member at digital asset manager and broker Crypto Finance, was among those who had suggested a “healthy” correction could follow the run-up in prices in the first few days of the year.
But the volatility will revive memories of the boom-and-bust experienced by bitcoin holders three years ago. Economist Nouriel Roubini warned on Twitter last month that retail and institutional investors would again get “burnt hard” as a speculation-driven bubble pops.
“The rise in [bitcoin] has no fundamentals,” he said in a tweet.
Some bitcoin backers have argued that the asset’s recent rally has seen fewer of the big swings in value that it has long been associated with.
Speaking before the latest plunge, Marcus Swanepoel, chief executive of London-based cryptocurrency platform Luno, said bitcoin “will still have its ebbs and flows, that’s for sure”.
He added: “However, relative to even a few years ago, it’s in a better place with regards to volatility than it’s ever been.”