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Bitcoin and other digital currencies are trading sharply lower Tuesday, with bitcoin on the verge of notching its worst daily decline in three weeks.
The price of a single bitcoin BTCUSD, -5.00% was down as much as 6%, breaking out of a short-term trading band of $7,800-$8,200. Bitcoin last changed hands at $7,725.26, down 5.3% since Monday at 5 p.m. Eastern time on the Kraken crypto exchange, and is on track for its worst daily slide since July 10, when it booked a 5.5% drop.
The move comes after Nobel-Prize economist Paul Krugman said, in a New York Times op-ed, there is a real possibility that bitcoin’s price collapses, saying the digital currency doesn’t solve any real-world problems and compared with the current monetary system, it is inefficient.
“Instead of money created by the click of a mouse, we have money that must be mined—created through resource-intensive computations,” wrote Krugman.
Irrational exuberance in trading is coming to an end
The volatile price action of cryptocurrencies in 2018 has caused some investor fatigue, according to one asset-management firm. However, the Santa Monica, Calif.–based Element Asset Management said it believes this behavior is coming to an end.
“The retail investor that has been forced to perpetually adjust their decisions in response to the market has likely lost the patience to continue making rational decisions. This investor has likely entered into a period of extreme decision fatigue,” wrote Element’s portfolio director, Thejas Nalval, and Kevin Lu, the firm’s director of quantitative research.
“The long-term implications of this change of behavior can be theorized and debated for months. We, however, choose to view this decision fatigue as a possible signal that the irrational exuberance is coming to an end and that the market fundamentals are now shaping up to a point that will see rational speculation drive price action in a more orderly manner.”
Altcoins stumble; Bitcoin’s dominance nearing 50%
Altcoins, or coins alternative to bitcoin, have followed bitcoin’s lead Tuesday. The overall decline in cryptocurrencies has pushed the value of all digital currencies to $277 billion, a 10-day low.
Ether ETHUSD, -4.54% was down 4.7% at $432.33, Bitcoin Cash BCHUSD, -4.60% is trading down by 5.1%, at $770.60, Litecoin LTCUSD, -5.32% is down 5% to $78.26 and Ripple’s XRP coin XRPUSD, -2.25% was trading at 44 cents, down 2%.
Bitcoin futures have tracked spot markets lower Tuesday. The CME Group Inc.’s August contract BTCQ8, -4.75% is down 4.8% at $7,710 and the comparable Cboe Global Markets Inc. contract XBTQ8, -4.75% is trading at $7,730, down 4.6%.
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