Bitcoin plunges 11pc after flirting with record highs
The price of Bitcoin has dropped 11pc from its three-year high. One Bitcoin now costs $17,220 (£12,900) down from £14,500 just 24 hours ago, according to Coinbase, a cryptocurrency trading site.
The digital currency, often referred to as “digital gold” due to its finite supply and supposed low correlation with stocks and bonds, was on the cusp of reaching an all-time high of £15,000 before traders turned against it.
Bitcoin has been on a tear this year rising 140pc as investors bet that mainstream adoption would allow it to overcome a credibility hump, sending its price ever higher as more DIY and professional investors opted to own it.
Where the price goes from here is anyone’s bet. Bulls argue that because Bitcoin is limited to 21 million coins, with 18.5 million already in circulation, then its price will inevitably rise when governments print money and inflation takes hold. Similar to gold, they argue that it is a hedge against governments devaluing fiat currencies.
Danny Scott, of CoinCorner, a trading site, said: “Investors are being drawn to it because the price has the potential to rise at a quicker rate than gold, but it has similar properties to the yellow metal. It is also cheaper to store.”
On the other hand, sceptics say Bitcoin has no intrinsic value and is therefore a speculative bet, rather than a considered investment.
Amyr Rocha Lima, a financial planner at Holland Hahn & Wills, said: “Bitcoin shows many characteristics of a speculation rather than an investment. The volatility alone is reason enough for people not to invest in it other than with money they wouldn't be seriously harmed by losing.”
The latest price drop following a sustained rise in value which highlights the dangers of investing in something when it is surging in popularity.
“In my own professional experience, human nature makes for a perverse investor, and when speculating with commodities, people tend to buy when it’s high in the hope that it will go even higher and sell when it’s low in the hope of cutting losses before it goes even lower," Mr Mr Rocha Lima said.
“This sometimes can deliver some short-term financial gains, but it doesn’t make for a good investment strategy to achieve one’s long-term financial goals.”
