Bitcoin’s stratospheric rise hit a major bump on Friday.
The value of the so-called cryptocurrency, which had surged in recent weeks, plunged more than $4,000, or 25 percent, in a 24-hour period, falling to less than $12,000 on Friday morning in New York, according to Coinbase, the primary platform that U.S. investors use to trade virtual currency.
By late morning, it had regained some ground and was hovering around $13,000, up from $11,069 at about 9 a.m. In the meantime, trading became so heavy that Coinbase temporarily suspended activity, according to a message posted on its website shortly after 11 a.m. Eastern time.
A second message, posted on the site around 20 minutes later, said, “Due to today’s high traffic, buys and sells may be temporarily offline. We’re working on restoring full availability as soon as possible.”
Bitcoin’s value has been sliding throughout the week after moving past $19,800, a new high, on Sunday, according to Coinbase.
To many people, the steep slide was inevitable and a reality check of sorts.
Investors, and not just those of the institutional variety, have recently flocked to bitcoin and other cryptocurrencies at a pace that made an already volatile market even more unpredictable during the holidays. Companies have even taken to rebranding themselves in hopes of capturing some of the attention being lavished on virtual currencies and the blockchain technology that provide their foundation. Cameron and Tyler Winklevoss, who gained prominence for fighting Mark Zuckerberg over ownership of Facebook, have amassed a bitcoin fortune that was worth more than $1 billion at the beginning of the week.
But virtual currencies, and their role in the initial coin offerings being used by entrepreneurs to raise money, have drawn concern from regulators and investment advisers. Earlier this week, investment strategists from UBS published a note calling bitcoin “the biggest speculative bubble in history” and urging clients to exercise caution.
“Maintaining a long-term focus is critical and also requires investors to resist ill-considered investments based on the fear of missing out (FOMO),” the analysts wrote. “Predicting the peak is difficult, but all bubbles tend to end the same way — with a transfer of wealth from the many to the very fortunate few.”
Despite the declines this week, the values of virtual currencies are still significantly higher than they were a year ago, with bitcoin specifically up more than 1,300 percent and ethereum up more than 8,000 percent.
One hedge fund dedicated to virtual currencies, the Pantera Bitcoin Fund, recently informed investors of its returns since starting business in 2013. The gains, reported in a letter this week, came out to 25,004 percent.