Fears now abound that a major crash in the cryptocurrency's price could be underway.
- Bitcoin price drops below $14,000.
- Price is down from $20,000 just a few days ago.
- Fears now abound that a major crash in the cryptocurrency's price could be underway.
LONDON — The price of bitcoin dropped almost $3,000 in early trade on Friday morning sparking fears that a full scale crash of the world's biggest cryptocurrency could be underway.
It has since recovered some of those losses, but remains down by close to 12% on the day
Early on Friday bitcoin's value was down close to 17%, or $2,650 as investors sold out of the illiquid asset aggressively. Since then it has pulled back a little, and as of 12.00 p.m. GMT (7.00 a.m. ET) is trading at around $13,800. Here's the chart:
As is often the case with large scale moves in either direction for bitcoin, there doesn't seem to be any obvious catalyst for the sell-off, but given the general lack of liquidity in the market small moves can turn into big ones very fast.
Earlier in the week, bitcoin's price had started to plunge after one of the founders of influential website bitcoin.com announced that he was selling his stake in bitcoin.
Bitcoin does not have any mechanism to halt trading when there are large losses in its value like more traditional markets — these are often known as circuit breakers, and automatically pause trading when assets fall by a set percentage.
As Business Insider Australia's Paul Colgan and David Scutt point out, the day's sell-off has rippled into other major cryptocurrencies:
"The price action appears to be spilling over into other cryptocurrencies, with the second-largest by overall market value, Ethereum, down 26%, and bitcoin spinoff Bitcoin Cash — which was moving in the opposite direction to bitcoin earlier this week — down a whopping 38% in 24 hours, according to Coinmarketcap," target="_blank" they noted a little earlier.
Earlier this week, Dr Garrick Hileman, an economic historian at the University of Cambridge told Business Insider that he believes cryptocurrencies could trigger the next financial crisis if they become a systemic risk to the financial system.