Bitcoin Prices Drop 20 Percent in Overnight Trading
Bitcoin prices fell more than 20 percent on Thursday, falling from $1071 (all values USD) to $893 in just a few hours. The big drop was believed to have been mostly triggered by the growing strength of the Chinese Yuan.
Trading prices for the digital currency have skyrocketing over the past few months and recently peaked out at around $149. That rise is believed to have been triggered by increased demand from Chinese bitcoin buyers looking for safe harbors to store their cash while the Yuan faltered.
It’s also believed that increased currency controls in China, which have made acquiring foreign currency more difficult, were driving the recent bitcoin boom. As an end run, many Chinese purchase Bitcoin which can easily be converted into coveted foreign currency. According to a report on Fortune.com, as much as 95 percent of all bitcoin trading takes place in China for this very reason.
Over the past few weeks the Yuan has been dropping in value but a mere one percent increase yesterday was, apparently, enough to end the bitcoin rise. It’s a complicated situation that Chris Burniske, blockchain products lead at ARK Investment Management helpfully explained on Fortune.com saying:
People have been expecting a continuation of yuan weakness, so what you’ll see with the bitcoin markets is a lot of times, bitcoin will experience a price increase prior to a significant yuan devaluation.
Another factor at play in the Bitcoin drop is believed to be currency traders locking in profits from the recent rise in bitcoin prices before they fall too low.
By Thursday afternoon, bitcoin had stabilized somewhat and were trading at around $950.