Here we go again! Bitcoin is dead again…
The price of Bitcoin plunged Thursday after major cryptocurrency exchange Coinbase suffered an outage. It comes after Bitcoin and related digital currencies and stocks staged a powerful prolonged rally after last week’s Facebook (FB) announcement that it is entering the crypto space.
From the standpoint of bubble proofing a portfolio.
Bitcoin prices soared as high as $13,844.77 on Wednesday but plunged as low as $10,373 on Thursday.
At the latest posting time, prices were down 22% to $10,792.44, according to CoinDesk.
The last time the Bitcoin price topped $13,000 was in December 2017, the same month it reached its all-time high of $19,511 before a spectacular collapse in value.
The fall in Bitcoin price could partly be attributed to an outage on popular cryptocurrency trading platform Coinbase. A Coinbase spokesperson told CNBC the site was down “for a short period of time due to high volume.” However this may merely be a symptom of extreme downward pressure brought on by users trying to cash out of Bitcoin when the price is highest.
On Wednesday, after Bitcoin rallied roughly 40% since Friday, IBD warned the digital currency was flashing signs of a possible climax run.
Other digital currencies also fell sharply Thursday. Ethereum, Bitcoin Cash and Ripple (also known as XRP) all suffered double-digit losses after strong gains Wednesday.
Among Bitcoin- and blockchain-related stocks, Riot Blockchain (RIOT) tumbled 19% on the stock market today, after spiking 15% Wednesday. Overstock.com (OSTK) fell 3.6% after Wednesday’s 25% moonshot. Grayscale Bitcoin Trust (GBTC) was down 21% after popping 14%.
Facebook stock rose 1%.
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Bitcoin Price Boosters
Several factors have fueled Bitcoin’s rise. Facebook said last week that it will launch a digital currency, called Libra, next year, with big partners like Visa (V) and Uber Technologies (UBER). That was an indication that mainstream institutions are embracing cryptocurrencies and the underlying blockchain technology.
MoneyGram International (MGI) recently announced a deal with Ripple to use that cryptocurrency in payments. Ripple also took a stake in MoneyGram.
Also, cryptocurrency mining-chip giant Bitmain Technologies reportedly is getting ready for an initial public offering.
Finally, investors have Bitcoin fever again. Bitcoin prices have been going up, and that makes many want to rush in, bidding up the price.
Another Climax Run For Bitcoin?
But that raises a concern.
The rapid and accelerating run-up in Bitcoin prices could hit a crescendo soon. After a climax run, stocks, commodities and currencies usually lose more than half their value quickly. They can take months or years to recover, if ever.
Bitcoin has already had a massive climax run in late 2017. It was a fun ride until it wasn’t.
Investors in Bitcoin and related coins and stocks may want to take at least partial profits to lock in some big recent gains.
Facebook’s Libra Is No Bitcoin
Experts say there’s a big difference between Facebook’s Libra and the more speculative Bitcoin and most other cryptocoins.
“Libra is backed by a reserve of real assets — such as bank deposits and Treasury bills. That gives it intrinsic value,” CMC Markets analyst Margaret Yang told the Financial Times. She added that many other major cryptocurrencies, including Bitcoin, are “backed by nothing.”
Oanda senior analyst Craig Erlam also drew parallels between the recent run and the asset’s prior bubble.
“While I understand the excitement for the community that a company like Facebook, backed by other big names, has launched its own coin, this just feels a lot like last time and we all know what happened then,” Erlam said in a research note. “Perhaps this time the drop-off won’t be so bad as we are seeing more mainstream adoption, but it may be naive to think that it can’t come crashing down again.”