Uh Oh: Bitcoin Bubble Popping?

If so, it’s not alone. Bitcoin, the most well-known of the cryptocurrencies on the market, saw its value drop by over 23% in a 24-hour period, losing $213 off its previous price in just a day. The move caught the attention of CBS, which notes that volatility has been Bitcoin’s hallmark. This might be something else, however.

That impacts more than just Bitcoin, and today’s markets show it. Action over the last day looks like a run on the broader cryptocurrency market. Ars Technica’s Timothy Lee has tracked the players, and Bitcoin has suffered the lowest percentage drop in the last 24 hours.

Double-digit losses aren’t a new phenomenon, Lee also notes, but the remarkable instability in the markets over the last week, and more generally over the last quarter, point to a particular risk. “The big question,” Lee concludes, “is whether this time is different.”

Others see this as a predictable correction that will throw out the wannabes.

Ron William tells CNBC that Bitcoin has had major corrections in the past, up to 75% of its price. However, William thinks this could create a market contagion as the “poster child for cryptos”.

“What goes up in a straight line,” Williams points out, usually comes down in a similar manner. If this just clears out the recent suckers, then the long-term holders of Bitcoin and other cryptos will be fine, and the market will settle at a more rational valuation. But what is a rational evaluation for a fiat currency with no sovereignty to guarantee it? The longer this correction continues, the more important that question becomes.

If you’re confused as to why anyone would believe it to have rational value, you’re not alone. Reason’s Remy doesn’t clear up that confusion, but he still has an awful lot of fun with Bitcoin and provides a bonus shot at Al Franken to boot (via Steven Hayward).