SAN FRANCISCO: The air has been swiftly leaking out of the virtual currency bubble.
A decline in virtual currency prices that began before Christmas has picked up pace in recent days as concern has grown that governments could crack down on the new industry.
The price of bitcoin dipped below $10,000 on Wednesday, taking it to about half what it was at its peak last month.
Other virtual currencies have been falling even faster. Ripple, which was briefly second in value after bitcoin, has lost more than two-thirds of its value from the high it hit early this month.
The falling prices have been serious enough to prompt online posts with suicide hotlines for virtual currency investors in despair.
The declines are likely to be particularly painful for people who took out debt to buy virtual currencies at high prices. Even the lows hit on Wednesday are still well up — some 1,000 percent — from where bitcoin began 2017. But that is little comfort for the people who purchased late last year.
For skeptics of virtual currencies, the falling prices have provided some vindication.
“Most people are buying bitcoin, not because of a belief in its future as a global currency, but because they expect it to rise in value,” a note from economists at Capital Economics said Wednesday. “Accordingly, it has all the hallmarks of a classic speculative bubble, which we expect to burst.”
The pessimism in recent days has been fed by several reports that governments around the world were planning to tighten the reins on virtual currency trading.
South Korean officials have said they were contemplating shutting down the virtual currency exchanges that have popped up over the past year. South Korea has seen the most frenzied surge of ordinary investors throwing their savings into bitcoin and other digital tokens.
Regulators in the United States have continued to crack down on smaller virtual currencies like Bitconnect, which has been described as a Ponzi scheme by many in the industry.
Some longtime virtual currency investors have said that a major price pullback was necessary after the hype had gotten so far ahead of the reality. -- NYT