Bitcoin plummeted on Thursday, November 26, to its lowest level in 10 days, dragging smaller cryptocurrencies down and putting a halt on its blistering rally. The world's largest cryptocurrency slumped to 13 per cent, its lowest since November 16. Bitcoin was last down 9 per cent at $17,074, a drastic correction from its three-year high of a $19,521 hit on Wednesday, November 25. Bitcoin rallied around 140 per cent this year tracking increased demand for riskier assets and expectations that cryptocurrencies will win mainstream acceptance. Ethereum, the second-largest cryptocurrency, dropped around 13 per cent, while XRP, the third-biggest one, dropped by 20 per cent.
Both these coins, having generally been moving in tandem with bitcoin, touched multi-year highs earlier this week. The cryptocurrency's 12-year old history has seen sharp gains and drops. The volatile nature has affected the use of payments and made several larger investors cautious.
Since 2017, a cryptocurrency derivatives market has developed, with the offshore exchanges offering highly leveraged positions. During times of thin liquidity, any move in these markets can put an outsize effect on bitcoin's price. Some expressed worries surrounding the speculation from market players amid tighter US regulation.
"There's definitely been a sense of euphoria in markets over the last couple of days," said Joseph Edwards of crypto brokerage Enigma Securities. "This mostly feels like a reaction to that over-leveraged markets took one small hit and suffered immensely,'' he added.
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A bitcoin is similar to cash but in electronic form. It surged exponentially this month ever since entering a four-digit value in 2013. Many major banks around the globe are exploring options for issuing digital currencies.