26 April 2019
Bitcoin surged more than 14 percent to US$6,718, though it was still over US$1,000 less than last week’s record high. Photo: Bloomberg
Bitcoin surged more than 14 percent to US$6,718, though it was still over US$1,000 less than last week’s record high. Photo: Bloomberg

Bitcoin claws back over US$1,000 after losing a third of value

Bitcoin surged on Monday, recovering more than US$1,000 after losing almost a third of its value in less than four days as traders bought back into the volatile cryptocurrency, Reuters reports.

Bitcoin tumbled in the second half of last week, falling as low as US$5,555 on the Luxembourg-based Bitstamp exchange on Sunday, a slide of almost 30 percent from a record high just shy of US$7,900 on Wednesday.

It rebounded on Monday, trading up more than 14 percent on the day at US$6,718, though that was still more than US$1,000 less than last week’s record high, the news agency said.

Market watchers said the fall had been driven by a decision on Wednesday to abandon a planned software upgrade that could have split the cryptocurrency in a “fork” – a move that had initially had a positive impact on the digital coin, sending it to a record high of US$7,888 on the view that this marked a resolution of a long-term dispute.

But some were disappointed that “Segwit2x” fork had been abandoned. It would have increased the capacity of the “blocks” transactions are processed in, thereby reducing competition to get payments processed and lowering transaction fees.

Consequently, analysts said, some of those who see low fees as important to the future of Bitcoin were selling it for a clone called Bitcoin Cash that spun off from the original in August. Its block sizes are larger, and therefore transaction fees are lower.

Bitcoin Cash tripled in value at the end of the week as bitcoin slid, reaching an all-time high just below US$2,000 on Sunday and briefly overtaking Ethereum as the world’s second-biggest cryptocurrency.

But traders bought back into the original Bitcoin on Monday, sending Bitcoin Cash plummeting. It was trading down over 30 percent on the day at around US$1,097, according to industry website Coinmarketcap.

“Bitcoin and Bitcoin Cash will co-exist and serve different use cases, just like Bitcoin and Ethereum. It’s not a zero-sum game,” Bitcoin and security expert Andreas Antopolous said in a post on Twitter.

Bitcoin is up more than 500 percent so far this year.

Bitcoin thrives on anonymity

In New York, BlackRock Inc. chief executive Larry Fink said Bitcoin remains a “speculative” investment that thrives because of the cryptocurrency’s anonymous nature.

“The reason why it does so well is it is anonymous. It’s anonymous, and it’s cross-border,” Fink, whose firm oversees nearly US$6 trillion of assets, said at the Reuters Global Investment 2018 Outlook Summit.

“If you legitimize it, you know who your counterparties are… The question is how many people will use it if you have to acknowledge you are a buyer or a seller.”

Fink called Bitcoin a “very speculative instrument. More importantly, it is an instrument that people use for money laundering.”

He said most investors with long-term horizons, and who are keeping “record amounts” on the sidelines, should be focused on traditional assets such as stocks and bonds.

For a 30-year-old person, “100 percent equities is the right investment strategy” at a time when the world’s economies are enjoying “synchronized growth” for the first time since the financial crisis, he said.

Bitcoin “is tiny in the scheme of financial markets,” Fink said. Overall, “there’s too much focus on bitcoin. I don’t know why it has so much fascination for the press,” he added.

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