Bitcoin plunges as much as twenty percent as Chinese yuan soars, Reuters
Bitcoin plunges as much as twenty percent as Chinese yuan soars
LONDON (Reuters) – A dramatic rally in digital currency bitcoin came to a spectacular end on Thursday with a plunge of up to twenty percent as China’s yuan rose sharply – further evidence of an intriguing inverse relationship inbetween the pair.
Bitcoin had gained more than forty percent in two weeks to hit a three-year high of $1,139.89 on Wednesday, just timid of its all-time record of $1,163 on the Europe-based Bitstamp exchange BTC=BTSP. But it dived as low as $885.41 on Thursday as the yuan hopped by over one percent in offshore trading and headed for its strongest two-day spectacle on record. CNH=D3 [CNY/]
Chinese exchanges have reported high volumes of trading of the web-based “cryptocurrency” over the past year, during which time the yuan has shed almost seven percent, its worst annual spectacle since 1994, while bitcoin has surged one hundred twenty five percent, outperforming all other currencies for a 2nd year in a row.
Bitcoin can used for moving money across the globe quickly and anonymously, and operates outside the control of any central authority. That makes it attractive to those wanting to get around capital controls, such as in China, and also to investors who are worried about a devaluation in their currency.
“Given that the yuan’s weakness over latest months seemed to correlate with bitcoin’s strength more than any other currency, it’s no surprise that bitcoin traders have reacted the way they have to the yuan’s unexpected strength today,” said Paul Gordon, co-founder of London-based Quantave, a rock hard seeking to make it lighter for investors to access digital currency exchanges.
Exchanges in China say they account for more than ninety percent of global bitcoin trading, which would help explain why a shift in Chinese request would sharply affect the price.
But many bitcoin experts say Chinese exchanges overstate their volumes in the digital currency, and attribute acute moves to speculation by, for example, U.S.-based hedge funds.
Some said bitcoin’s fall was a natural reaction to the speed of its previous rise. It is still up more than fifty percent on three months ago, when it was trading at around $600,
“If something goes up very rapidly. people make a lot of money, and at some point they’re going to want to sell, in order to realize their gains,” said Marco Streng, CEO of bitcoin mining and trading rock hard Genesis Mining.
By one thousand six hundred forty five GMT (11:45 a.m. ET), bitcoin had recovered some of its earlier losses to trade down almost fifteen percent on the day at around $950, still leaving it on course for its worst spectacle in a year.
On some digital currency exchanges – of which there are dozens – bitcoin did reach record highs late on Wednesday.
“Once we broke through the nominal all-time high, liquidity dried up – no cut-offs, no sellers, which means a volatile little bubble formed quickly,” said Peter Smith, CEO of London-based Blockchain, the fattest bitcoin wallet-provider globally.
“We are eyeing the effects of that now as it violates. It’s still fairly lean trading volume tho’, so who indeed knows where it goes next.”
For a graphic on the bitcoin economy, click here%20ECONOMY%20T.jpg
For a graphic on bitcoin exchange rates, click here
Reporting by Jemima Kelly; Editing by Mark Trevelyan