Bitcoin-mania is back with its dizzying rallies and sudden crashes. The cryptocurrency dropped by 8.4 per cent on Thursday after nearing a record high on Wednesday.
The slump comes after Bitcoin surged around 50 per cent over the past three months and 140 per cent this year. The digital currency was trading at around US$17,000 (around $22,082) early on Friday after hitting a three-year high of US$19,521 ($25,357) on Wednesday.
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The drop has also dragged down other popular digital currencies like Ethereum and XRP, the third-biggest. Both coins, which tend to move in tandem with Bitcoin, had hit multi-year highs earlier this week.
Bitcoin enthusiasts see the drop as a minor correction triggered, at least in part, by tweets by the CEO of major cryptocurrency exchange Coinbase expressing concern at rumours of an impending U.S. regulatory crackdown.
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Skeptics warn of another speculative bubble that will, eventually, burst.
But is this crypto rally different from the one that saw Bitcoin surge to an all-time high of nearly US$20,000 in December 2017?
The answer is “yes and no,” says Andreas Park, associate professor of finance at the University of Toronto.
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One thing that’s different this time around is the interest in Bitcoin and other digital currencies from big business, Park says.
Paypal announced in October that it would enable U.S. account holders to buy, hold and sell cryptocurrency. Derivatives marketplace CME Group and Fidelity Investments Inc. also offer services that allow for buying and selling crypto assets.
JP Morgan Chase has created and tested its own digital token, JPM Coin, despite CEO Jamie Dimon having been a vocal critic of Bitcoin in the past. The investment banking giant has also started offering banking services to two well-known crypto exchanges, Coinbase and Gemini Trust.
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Headlines about big companies and especially payment platforms stepping into the crypto space may have contributed to fuelling renewed excitement for crypto among the public, Park says.
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