Bitcoin rose 15 per cent on Tuesday, recouping about half of the losses it sustained last week, its worst since 2013, as investors who had missed out on earlier rallies bought the world’s biggest and best-known digital currency.
While bitcoin investors and analysts believe last week’s decline in its value was a natural correction after a heady run-up in prices, there have been further warnings from market regulators and central banks.
Bitcoin fell nearly 30 per cent at one stage on Friday to $11,159.93.
At 2009 GMT on Tuesday, bitcoin was up 15 per cent at $16,030 in light trading on the Luxembourg-based Bitstamp exchange.
“The latest price move shows bitcoin is still a speculative investment. There is enormous amount of volatility there,” said Kristina Hooper, chief global market strategist with Invesco in New York.
The digital currency had risen around twentyfold since the start of the year, climbing from less than $1,000 to as high as $19,666 on Dec 17 on Bitstamp and to over $20,000 on other exchanges.
“There is no right current price which would reflect the right current valuation,” said Andrei Popescu, Singapore-based co-founder of COSS, which describes itself as a platform that encompasses all features of a digital economy based on cryptocurrency.
“Taking profit is right, while buying into a long term projection is also right. You don’t have to be right in this market, just less wrong than the rest,” Popescu said.
Critics have pointed to bitcoin’s design flaws and hacks of digital “wallets” in which bitcoins are kept as an alternative to traditional currencies.
“We therefore think that bitcoin is a product that is unable to fulfil the basic functions it is meant to fulfil. We therefore think it is likely a bubble, that will eventually fade, as other cryptocurrencies will take over,” Citi analysts wrote in a research published on Friday.
Shmuel Hauser, the chairman of the Israel Securities Authority, was the latest among regulators to voice his concerns. He said on Monday he will propose regulation to ban companies based on bitcoin and other digital currencies from trading on the Tel Aviv Stock Exchange.
Singapore’s central bank last week issued a warning against investment in cryptocurrencies, saying it considers the recent surge in prices to be driven by speculation and that the risk of a sharp fall in prices is high.
Prices of other cryptocurrencies, which slid along with bitcoin last week, have also recovered, with Ethereum, the second-biggest cryptocurrency by market size, quoted around $771, up from Sunday’s low of $689 but still far from highs around $900 hit last week.