Courtesy of Pam Martens
Bitcoin was trading at over $57,000 on Friday. Over the next 24 hours it had plunged below $43,000. On some trading platforms, Bitcoin’s price was cut far below the $43,000 level. The Dow Jones news outlet, MarketWatch, reported that “NYDIG, a technology and financial services firm dedicated to bitcoin, said that the decline was even more severe for some offshore platforms such as Huobi, where bitcoin briefly touched a 24-hour nadir at $28,800 on Saturday.”
Bitcoin front month futures on the CME at 7:49 a.m. ET this morning show it had bounced back to $48,715.
This is hardly the first time this year that Bitcoin has put on a wild display of price swings. On May 19 Bitcoin removed any lingering doubts that it is a stable currency that could be used to pay for products or services. At that time the current month Bitcoin futures contract at the CME swung between a low of $30,250 to a high of $43,530 – a difference of $13,280 in one trading session. From its intraday high of $58,140 on Wednesday, May 12, to its close one week later on Wednesday, May 19, Bitcoin had lost 34 percent of its value.
The current problem with Bitcoin is the same problem that all other highly-leveraged trading instruments are having in the new world of Fed tapering. But Bitcoin has an additional problem: credibility.
One of the most respected investors in America, Warren Buffet, summed up Bitcoin like this in May 2018: Bitcoin is “probably rat poison squared.” Also in 2018, Bill Harris, the former CEO of Intuit and PayPal, wrote a detailed critique of Bitcoin for Vox under the headline: “Bitcoin is the greatest scam in history.” Harris explained:
“In my opinion, it’s a colossal pump-and-dump scheme, the likes of which the world has never seen. In a pump-and-dump game, promoters ‘pump’ up the price of a security creating a speculative frenzy, then ‘dump’ some of their holdings at artificially high prices. And some cryptocurrencies are pure frauds. Ernst & Young estimates that 10 percent of the money raised for initial coin offerings has been stolen.”
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