Bitcoin price plunges 32 per cent in 2 days

Bitcoin trading prices are notoriously volatile. Photo / AFP

The price of bitcoin has plummeted 32 percent in two days, as the virtual currency's volatility threatens to undermine its ability to gain mainstream use.

Bitcoin's price declined 15 percent yesterday and 20 percent today to $181.45, its lowest level since October 2013, according to CoinDesk's Bitcoin Price Index, an average of bitcoin prices across leading global exchanges. Bitcoin's 58 percent plunge last year already made it one of the biggest money-losing investments of 2014, worse than oil or the ruble.

"The price will continue to be volatile and driven by speculators in the short term," said Gil Luria, an analyst at Wedbush Securities Inc. "Nothing about the technology and its promise have changed, but in the short term that does not drive the price."

Bitcoin naysayers have been worried that governments around the world will regulate or prohibit the currency to crack down on criminals, and Russia is now moving closer to doing just that. A prolonged price drop could also, at least temporarily, put the future of the currency in question because the equipment and power needed to mine new bitcoins are so expensive. Mining new bitcoins is key to the underlying technology.

On the flip side, many proponents of bitcoin appreciate its relative anonymity and transaction verification via a public ledger. And despite the recent drop, some of the biggest backers of bitcoin say they aren't fleeing.

"I'm not going to comment on the recent price movement, other than saying I'm not concerned," Barry Silbert, chief executive officer of SecondMarket Holdings Inc., said in an e-mailed response to questions. Silbert's company was part of a bidding group that won 48,000 bitcoins at a U.S. government auction in December.

A bitcoin could be worth $100 or $1 million, and its value will fluctuate as new uses for the currency's underlying technology emerge, Luria said. Venture capitalists, including Tim Draper, have poured hundreds of millions of dollars into startups that are building new software on top of bitcoin technology. And companies from Microsoft Corp. to a Lamborghini dealership have said they accept bitcoin as payment.

With the value of bitcoin once topping $1,100 in 2013, the last year -- and this week, in particular -- has been a dramatic reversal of fortunes. But for those who don't see bitcoin going away, the recent decline has be a chance to snatch up more bitcoins in hopes prices will bounce back.

With so many buyers and sellers, transaction volume today has been among the highest ever, according to Blockchain.info.