Bitcoin plunges 18% after topping $11,000 in extremely volatile trading
Bitcoin has gained, and plunged, well over $1,000 in less than 24 hours.
The digital currency dropped more than 18 percent from a record high of $11,388.33 to $9,290.30 on Wednesday, according to CoinDesk. Bitcoin then attempted to recover the $10,000 level in the late afternoon and was last trading around $9,795. Trading was extremely volatile as exchanges struggled to keep up with the surging demand.
Trading volume was a whopping $9.75 billion over the last 24 hours, according to CoinMarketCap, compared with $2.26 billion for digital currency ethereum.
Coinbase, the leading U.S. website for buying and selling bitcoin, reported record-high traffic Wednesday. Services were unavailable for some customers. Coinbase’s GDAX exchange also reported “performance issues and downtime” Wednesday afternoon, but as of about 3:20 p.m. ET, it said those issues had been resolved.
“It’s definitely been going a bit parabolic over the past few weeks. I think today’s action marks somewhat of an inflection point,” said Jonathan Krinsky, chief market technician at MKM Partners. “But it’s still 200 percent above its 200-day moving average, so it’s not surprising to see some consolidation here.”
That all-time high itself came as bitcoin’s gains accelerated. About a week after crossing above $8,000, bitcoin topped $9,000 Sunday before soaring above $10,000 Tuesday evening.
“This isn’t going to end. There’s not enough liquidity from the market making to handle big-size [trading] when stuff gets loose like this. It’s not going to end,” said Leigh Drogen, a former trader who now heads Estimize, a 6-year-old company that collects and publishes financial estimates for data such as earnings. “This is one of the most difficult markets to trade because of the volatility. Everything is sped up by 10 times.”
Drogen pointed out that unlike the stock market, the bitcoin market has no big firms that would step in to buy after a sharp price drop, effectively supporting the price. “There’s no fundamental value to any of this stuff and it’s all based on … supply and demand at any point in time.”
But, analysts point out there are few long-term sellers right now for bitcoin.
Since bitcoin’s market capitalization is less than $200 billion, enthusiasts say the digital currency could rise dramatically if it draws even a tiny fraction of the world’s $200 trillion in traditional financial market assets.
Former Fortress hedge fund manager Michael Novogratz predicted Monday on CNBC’s “Fast Money” that bitcoin could “easily” be at $40,000 at the end of 2018. But Novogratz said Tuesday at CoinDesk’s Consensus Invest conference that cryptocurrencies like bitcoin are “going to be the biggest bubble of our lifetimes.”
Other major digital currencies fell Wednesday afternoon. Ethereum traded near $448, almost 14 percent off its all-time high hit earlier in the day, according to CoinMarketCap. Bitcoin offshoot, bitcoin cash, traded around $1,466, down roughly 5 percent on the day, according to CoinMarketCap.
“High volume, high volatility intra-day reversals like today, following strong upside surges, are generally viewed as technical warning shots of a potential trend shift,” Fundstrat technical strategist Richard Sluymer said in an email to CNBC. “In my opinion, BTC has had a very strong surge and both investors and traders should not be surprised to see a correction/retracement develop.”
Sluymer said he sees support for bitcoin around $8,500 to $9,000, followed by $7,500. On the other hand, he said it will likely be difficult for bitcoin to surpass $10,200 in the near term. Fundstrat has a mid-2018 price target for bitcoin of $11,500.