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Bitcoin plunges more than $3,000 after hitting new record

Bitcoin has given investors whiplash yet again.Just after hitting a new record of more than $17,000, the digit...

Posted: Dec 8, 2017 3:25 PM
Updated: Dec 8, 2017 3:25 PM

Bitcoin has given investors whiplash yet again.

Just after hitting a new record of more than $17,000, the digital currency plummeted Friday. Its price nosedived more than $3,000, swinging wildly between a high of $17,154 and a low of $13,964, according to tracking site CoinDesk.

Bitcoin has been on a wild ride this year. Its price has soared from less than $1,000 in January -- but with occasional sudden drops along the way.

Trading has become especially frenzied in recent weeks as new investors have dived into the volatile market. Before Friday's fall, it had gained roughly $5,000 in the previous 48 hours.

Related: I bought $250 in bitcoin. Here's what I learned

Arthur Hayes, CEO of Hong Kong-based bitcoin exchange Bitmex, said he thought the sharp correction Friday was "healthy" given that the digital currency's price had jumped about 80% the past week.

He predicted more sharp moves early next week when the Chicago Board Options Exchange starts allowing investors to trade bitcoin futures.

By Friday evening in Hong Kong, bitcoin was trading at around $15,000.

Bitcoin's extraordinary boom has raised a host of questions. Here are some of the major issues:

How do you buy bitcoin?

One of our reporters used his experience of buying $250 of bitcoin recently to explore what on earth is going on with the digital currency right now.

Related: I bought $250 in bitcoin. Here's what I learned

"It's an investing frenzy, plain and simple," he wrote.

Is it safe?

The online exchanges where many people trade bitcoin and other digital currencies have a checkered history.

Bitcoin: More than $70 million stolen in bitcoin hack

Some have gone bust altogether and others have suffered cyber heists in which hackers have made off with huge sums. The latest example is digital currency site NiceHash, where bitcoins worth more than $70 million were stolen this week.

What does Wall Street make of it?

One factor driving bitcoin's price higher and higher in recent weeks is the expectation that big financial players like hedge funds and asset managers are set to wade into the market. That's been supported by established exchanges in the U.S. saying they're planning to let investors trade bitcoin futures soon.

Related: Big banks say bitcoin futures could be dangerous

But big banks -- who have a complicated relationship with digital currencies -- have issued a warning about the dangers of bitcoin futures, saying the risks haven't been properly studied.

What does the future hold?

An environmental crisis is looming if bitcoin continues on its current trajectory, some experts say. The complex computer algorithms that underpin bitcoin require huge data centers that guzzle power.

Related: Bitcoin boom may be a disaster for the environment

One observer predicts that without a significant change in how transactions are processed, bitcoin could be consuming enough electricity to power the U.S. by the middle of 2019. Six months later, that demand could equal the entire world's power consumption.

-- Daniel Shane contributed to this report.

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