The virtual currency has lost more than 60% of its value this year
After last year’s manic surge, bitcoin prices have fallen over 60% this year.
The lull in cryptocurrency markets is over.
Bitcoin dropped more than 10% on Wednesday, falling below $6,000 and reaching new lows for the year. Other rivals also fell sharply in value, with market participants suggesting that a looming split in a separate digital currency called Bitcoin Cash triggered the broad decline.
One worry is the division, known as a fork, would weaken Bitcoin Cash and its successor. Bitcoin Cash, itself an offshoot of bitcoin, launched in August 2017; it has fallen nearly 90% since last year’s peak.
Andy Bromberg, co-founder and president of CoinList, a platform for listing digital tokens, said the prospect of large investors selling bitcoin to cover the risks of a fall in the value of their Bitcoin Cash holdings played a role in the market selloff.
“A single event, like a fork, can be a significant factor across wider crypto markets thanks to their relative immaturity,” Mr. Bromberg said. “Large holders will often make trades across multiple coins, causing ripple effects beyond the asset that instigated the movement.”
After 2017’s manic rally and this year’s steep plunge, cryptocurrency markets had been unusually calm in recent months even as swings in more traditional assets picked up. A measure of bitcoin’s volatility last week fell to its lowest point since December 2016.
But then the calm came to an abrupt end. Bitcoin recently fell as low as $5,390.12, according to research site CoinDesk, its lowest level since October 2017. It had traded around $6,500 for much of the past few months.
Bitcoin has lost more than 60% of its value this year and trades well below its record high near $20,000, which was set late last year.
One version of Bitcoin Cash is backed by Craig Wright, a controversial Australian businessman who has claimed to be bitcoin creator Satoshi Nakamoto but hasn’t been able to convince most people in the industry. The other is supported by Bitmain Technologies Ltd., the Chinese mining giant which filed in late September to go public, and Roger Ver, an investor known in the community as “Bitcoin Jesus.”
Bitmain co-founder Jihan Wu has been a big supporter of the Bitcoin Cash technology, believing it would fix problems—including transaction speeds—that have prevented bitcoin from becoming a mainstream payment tool. But analysts have said Bitmain’s large holdings of Bitcoin Cash could prove to be a liability, particularly since it has fallen so much in value.
“The highly contentious split of Bitcoin Cash and the backing of huge mining players, as well as the unclear position of all the clear stakeholders, have significantly disrupted the market,” said Angel Versetti, co-founder and chief executive at Ambrosus, a blockchain firm.