The price of bitcoin has fallen back below $10,000, down 30% from last week’s peak of nearly $14,000.
Continuing its wild ride, the digital currency dropped to $9,717 on Tuesday, down 8.1% on the day. Last Wednesday, the cryptocurrency shot up to $13,879, breaking through the $12,000 and $13,000 levels in less than two hours.
Bitcoin had languished below $6,000 for months, but was galvanised by Facebook’s plans to create a cryptocurrency called Libra next year.
Other digital currencies have also fallen back. Reports that an investor placed a large short order on Sunday, betting that the bitcoin price would go down in coming days, sparked panic among investors.
Bitcoin has seen wild swings in the past, and some analysts say it could rise back to $20,000 again – or fall as low as $3,000. In late 2017, it rose to close to $20,000, before a spectacular collapse in 2018.
The cryptocurrency’s latest gyrations prompted the US economist Nouriel Roubini, a long-time critic, to say that the bitcoin price would eventually fall to zero. He tweeted: “Its true value is negative, not zero, given its toxic externalities! It will get to zero in due time.”
Investors hope Facebook’s entry into digital currencies will bring greater legitimacy to the sector. Regulators around the world have warned that the move could lead to greater controls and tougher regulation to protect consumers.
Mark Carney, the governor of the Bank of England, cautiously welcomed Libra. He said the central bank would support new entrants into the UK financial system, but warned that Facebook would need to meet the highest regulatory standards.
Bloomberg reported last week that Henry Kravis, the co-founder of the US private equity firm KKR, had become the latest financier to bet on cryptocurrencies. He is investing in a cryptocurrency fund provided by ParaFi Capital. Other high-profile investors include British hedge fund manager Alan Howard, PayPal co-founder Peter Thiel and US hedge fund manager Louis Bacon.