Bitcoin’s value suffered a ‘beating’, losing more than a fifth of its value at one point over the weekend before settling below $ 50,000 (£ 37,720) in just one month after reaching an all-time high.
The value of the cryptocurrency topped $ 68,000 in November and is expected to rise even more by the end of the year, amid concerns over the value of traditional assets such as gold and government debt.
Some investors and analysts, including Wall Street Bank JP Morgan, have also viewed bitcoin as a hedge against inflation, which has started to take off in major economies, including the UK and US.
But the world’s largest digital currency, which had reached a total market value of $ 1.1 billion before the weekend’s drop, has struggled to maintain its momentum since reaching an all-time high for the month. latest.
Bitcoin began to slump on Saturday, falling 22% from $ 53,890 to a temporary intraday low of $ 41,967 before gaining ground. On Monday, it was trading at $ 48,600, its lowest level since October.
The cryptocurrency has been volatile in recent months but remains much more valuable than it was five years ago, when investors could buy a single coin for $ 700.
UBS bank analysts blamed the weekend’s crisis on a variety of factors, including uncertainty before cryptocurrency exchange bosses were questioned by a U.S. congressional committee on Wednesday.
“Crypto is often presented by supporters as a useful hedge against portfolio inflation, but wild swings like the ones we’ve seen over the weekend confirm our view which is more akin to a highly speculative risk asset. “the analysts said. “Regulation remains a key element, and this unruly process and its impact on retail participants can add to the conversation about regulation. “
AJ Bell analysts said bitcoin had suffered its “last blow”.
As bitcoin fell, other “altcoins” like Ethereum were worth over $ 4,600 on Friday night, but just over $ 4,000 on Monday afternoon.
Bitcoin emerged after the 2008 financial crisis, allowing people to bypass banks and traditional payment methods. It has become the largest among thousands of cryptocurrencies.
It relies on “blockchain” technology, which is a shared database of transactions with entries that must be confirmed and encrypted. The network is secured by individuals called “miners” who use powerful computers to verify transactions, with bitcoins being offered as a reward.
There are over 18 million bitcoins, and the mathematical system controlling the generation of new coins – which is decentralized and therefore does not have a global institution such as a central bank – has a maximum of 21 million hard-wired coins. .