TOKYO -- Bitcoin is continuing its wild ride. After nearing $20,000 for the first time last week, the cryptocurrency fell by some $2,000 within an hour on Wednesday morning. Analysts attributed the plunge to an influx of funds to Bitcoin Cash.
The cryptocurrency was also affected by South Korean coin exchange Youbit, which plans to declare bankruptcy after a hack resulted in about a 17% decline in assets. The county has flocked to cryptocurrency perhaps more than any other -- so much so that Prime Minister Lee Nak-yon recently warned that the trend may be corrupting the nation's youth.
According to CoinDesk, a website specializing in digital currencies, the price of Bitcoin dropped to around $15,600 shortly before 10 a.m. on Wednesday -- a plunge of $2,000 from the day's high of around $17,600 set an hour earlier.
On the Chicago Mercantile Exchange, Bitcoin futures fell by more than $1,700, prompting the CME to temporarily introduce the first of three price limits.
But Hong Kong-based Cryptomover said that the price plunge was caused mainly by some miners shifting away from Bitcoin to Bitcoin Cash.
In the Bitcoin mining industry, where miners can gain coins if they decrypt faster than others, competition is further intensifying owing to a steep increase in the number of miners.
Competition to speed decryption is also heating up, causing a sharp rise in electricity and other expenses. As smaller miners become overburdened financially, they turn to Bitcoin Cash, or the "second Bitcoin," analysts say.
At about the same time as Bitcoin's plunge, the price of Bitcoin Cash surged above $3,000 for the first time shortly after 9 a.m.
Investors, especially individuals, have been growing increasingly unhappy with Bitcoin since earlier this month due to rising commissions and frequent delays in receiving and withdrawing coins.
As Bitcoin Cash has become more tradeable thanks to an increase in the number of miners, individual investors are purchasing more Bitcoin Cash, which is more affordable than Bitcoin.
Trades on cryptocurrency exchanges are mostly speculative, making incremental movements of $1,000 an almost daily occurrence. The collapse of Youbit, a small exchange, has not affected big exchanges. Following the plunge Wednesday morning, Bitcoin rebounded close to $17,000 shortly after noon as traders bought the dip.
Bitcoin surged to the psychologically important threshold of $10,000 at the end of November, arousing greater attention from investors. Within less than three weeks, the price rose to $19,700, nearing the next important threshold of $20,000.
Many observers noted the need for price adjustments in order to establish a healthy market.
Nasdaq is expected to launch Bitcoin futures trading in 2018. While market improvements are also expected for options and swaps, Bitcoin developers and others are likely to promote countermeasures, such as speeding up trades.
Although Bitcoin remains highly volatile, investors may panic less during short-term price swings if the liquidity of the cryptocurrency improves.