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Friday, June 28, 2019 –
6:08am
The world’s most widely traded digital currency fell
$1,800 in a matter of minutes, virtually wiping out a month of
gains, in a drop that underscores the volatility of digital
currency.
Bloomberg reports that “Bitcoin soared as much
as 39% this week to $13,852, the highest since January 2018. But it
hit a brick wall around 4:30 p.m. New York time Wednesday, plunging
more than $1,800 within about 10 minutes. Moments later, prominent
cryptocurrency exchange Coinbase Inc. reported an outage on its
consumer site, which was resolved in under an hour. Swings
continued Thursday, with the coin anywhere from down 15% to up
4.8%.”
Binance hack: what happened and has it affected
bitcoin prices? Bitcoin price: could cryptocurrency surge herald a
bull run?
Genesis Global Trading CEO Michael Moro told CNBC that “even the most optimistic crypto
bulls would tell you that a 50%+ move in a week is too much too
fast.” He said a “key driver” behind the price whiplash was
leverage — borrowing money — to make a trade. “The presence of
leverage exacerbates the moves in both directions and affects the
speed dramatically.”
Investor’s Business Daily raises the prospect
that another cryptocurrency bubble could be about to burst, adding
that 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.”
Factors determining the general increase in demand for
digital currencies include geopolitical tensions involving Iran and
the US-China trade war, dovish monetary easing by central banks,
and the recent trend for large institutions trying to enter the
cryptocurrency market.
As the Financial Times reports, “Analysts said the
bout of enthusiasm for virtual currencies had been stoked by a
confluence of factors. Among the most significant is Facebook’s
move into the world of crypto, launching its own currency called
Libra in an attack by big tech on the payments industry. Analysts
are optimistic that Libra could help cryptocurrencies generally
gain more mainstream acceptance, as means of payment and as a store
of wealth.”
Speaking to the FT, Alistair Milne, chief investment officer of
the Altana Digital Currency Fund, said that the rapid correction
was “inevitable — you simply don’t go up this quickly and sustain
it forever, followed by consolidation”.
“There are several things a trader needs to do in this volatile
environment,” reflects Clem Chambers in Forbes. “Lower their leverage
and keep their stops mental and away from round numbers and the
platform’s awareness. It is and always has been a sad fact that
leverage kills and the more you have the faster the demise.”
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