Traders panic as Bitcoin bubble pops


Bitcoin lost almost half its value in a week as panic selling gripped the online currency just as fears grew punters were being allowed to buy it using a credit card.

In a frenzy of frantic trading the value of bitcoin fell more than 25 per cent yesterday alone, before swinging up and down wildly as dread gripped the market that a bubble had burst.

As the Mail went to press, the stock was down almost 18 per cent on the day, and had lost over a third of its value in a week, from a high of $19,757.

Bits and pieces: Bitcoin lost almost half its value in a week as panic selling gripped the online currency

Bits and pieces: Bitcoin lost almost half its value in a week as panic selling gripped the online currency

The currency is now officially in what traders call a bear market, having plunged so heavily in value.

The wild swings come as the Mail can reveal that online trading websites including major exchange Coinbase, which has an estimated 11.7m users, were allowing customers to pay for the digital currency with a Visa or Mastercard credit card.

It means that many buyers may be borrowing money at high interest rates to put into the currency, just as its value collapses. It could leave many nursing huge losses as well as debts.

Borrowers could be unable to pay back what they owe if the price crashes, with unpredictable consequences for the wider banking system.

Neither of Britain’s two biggest conventional share and fund trading platforms – Hargreaves Lansdown and Barclays Smart Investor – will let customers pay with credit cards.

Danny Cox, of Hargreaves, said: ‘Borrowing to invest is complete lunacy. The risk is that you get people buying this stuff and paying huge interest rates of up to 25 per cent.

‘If they make losses then they’ve got huge amounts of interest to pay on top.’

It came as bitcoin’s price plunged 30 per cent or almost $5,000 in a matter of hours yesterday, in a pre-Christmas rollercoaster which led to fresh fears of a toxic bubble.

The online currency dived from highs of $15,830 to lows of $10,835 yesterday, according to price-tracker website Coinbase.

This plunge follows a year in which speculators piled into the currency, ignoring warnings from central banks and seasoned traders that they could lose everything when the market turns.

After swinging around wildly – with repeated rises and falls of more than $1,000 happening in minutes – the currency recovered to around $12,758 shortly before 5pm yesterday.

But on discussion website Reddit, traders fretted that there could be further falls to come. ‘I seriously hope bitcoin can recover from this nightmare,’ wrote one.

Another said: ‘I’m not sure how much I want to allocate to this dip but I just keep buying.’

Senior figures from legendary investor Warren Buffett to chief executive of the Financial Conduct Authority, Andrew Bailey, have warned that bitcoin could suddenly crash and trigger massive losses for investors.

And many are warning about the dangers of borrowing to get in on the investment fad. Coinbase, which is the biggest US-based exchange for bitcoin, allows customers to pay by credit card, which it says is quicker than transferring cash from a bank account – a procedure that can take up to three working days.

It temporarily suspended trading last night, saying this was due to ‘high traffic’.

Coinbase did not respond to a request for a comment.

Others which have allowed UK credit card purchases include Isle of Man-based Coincorner.

A spokesman for Coincorner said: ‘People are free to buy anything they want on their credit cards. If people are spending more than they can afford then their bank should review their credit limit.’

The Etoro exchange, which has its headquarters in London, accepts deposits funded by credit cards up to £15,000 per transaction. Its UK managing director Iqbal Gandham said: ‘It is not uncommon for investments to be made via credit card – it’s simply a reflection of the way lots of people manage their spending.’



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