Bitcoin enthusiasts had a scare this weekend, as the price of the currency plummeted from $356 on Saturday to a low of $290 on Sunday—a drop of more than 18%, percent according to CoinDesk’s Bitcoin Price Index. The virtual currency has since rebounded to a price of roughly $330 at press time Monday, down about 13% over the last seven days.
Despite the price drop, Reddit’s r/Bitcoin, a popular gathering place for the currency’s supporters, was largely optimistic. “Who else is enjoying the firesale? Who else is picking up tons of cheap bitcoin?” asked one poster. But not everyone was confident that the price would recover. The New York Times quoted one worried user asking fellow Bitcoin fans for support. “As the price is going down, some of us are under immense psychological stress,” the post read. “Please share how you cope with it.”
Sunday’s crash was hardly Bitcoin’s first price panic, or even its most significant drop. In 2013, the currency lost almost 40% of its value between December 4 and December 7, when the price dropped from its all-time high of $1,147 to $694 in less than a week. After partially regaining those losses, Bitcoin fell 40% again from December 15 to 18, going from $879 to $522. Since the beginning of this year, Bitcoin’s price has been relatively more stable, but the descent has continued. From January through October 6 of this year, the currency has lost more than 40% of its value.
Exactly why the price cratered is subject to debate. Some have cited upcoming regulations, such as those proposed by New York’s Department of Financial Services, that will curtail the free-wheeling nature of the currency. Others have suggested that Bitcoin’s recent increase in popularity among retailers may have actually hurt its value. Paul Vigna at the Wall Street Journal theorized that because more merchants are using a service that instantly converts Bitcoin payments into dollars, all those Bitcoin sales may be driving down the price. However, as Vigna notes, such a long-term trend can’t directly explain this weekend’s sudden crash.
Bitcoin detractors have used this latest price fluctuation as a chance to take something of a victory lap. On Sunday, Paul Krugman, a longtime cryptocurrency critic, likened Bitcoin to a number of get-rich-quick schemes, from Glenn Beck’s “buy gold” ads to direct mail scams. “Bitcoin may be sold as a technical marvel, and it does indeed solve an interesting information problem,” acknowledged Krugman, but “it’s not at all clear whether solving that problem has any economic value.”
Other Bitcoin watchers say the hiccups may only be temporary. Rafael Corrales, a partner at Charles River Ventures, argued in the Times that recent Bitcoin price fluctuations are the result of its “transition stage” between between speculative vehicle and actual currency: “When Bitcoin becomes a currency, it realizes its potential.”