What China giveth, China taketh away. Thanks to a rise in the value of the Chinese yuan, the price of bitcoin plunged Thursday from recent near-record highs.
Bitcoin breached the $1,000 mark on Jan. 1 before hitting a three-year high of $1,139.89 on Wednesday, just short of its all-time record of $1,163. But it dropped a staggering percent to $887.47 by noon Thursday, including a drop of $200 in a single hour on heavy trading.
Much of the growth in bitcoin’s value over the last 12 months has come from China, where tightening transaction restrictions and a currency that dropped 7 percent in value in 2016 saw investors flock to bitcoin as both an alternative payment method and a safe haven for their money. That downward pressure on the exchange rate shifted in early trading Thursday.
The Chinese currency rose 1 percent in value against the U.S. dollar, prompting Chinese investors to convert their bitcoins back into yuan. That in turn caused the price of bitcoin to plunge.
“Given that the yuan’s weakness over recent months seemed to correlate with bitcoin’s strength more than any other currency, it’s no surprise that bitcoin traders have reacted the way they have to the yuan’s sudden strength today,” Paul Gordon, cofounder of Quantave Global Ltd., a London company that helps investors access digital currency exchanges, told Reuters.
The same Reuters report claims that some simply see the price drop in bitcoin as being more likely due to a correction in the market after a bubble in its valuation over the last three to six months. If something goes up very rapidly … people make a lot of money, and at some point they’re going to want to sell, in order to realize their gains,” said Marco Streng, chief executive the bitcoin mining and trading firm Genesis Mining.
The good news for bitcoin investors is that the price of the popular cryptocurrency has stabilized somewhat, trading at an average price of $968.88, still well up on its price of $616.49 only three months ago.