Bitcoin (BTC/USD) bounced back on Thursday from one of its sharpest drops of the year, gaining 16% to $345 on Bitstamp.
The bounce reverses the inertia of a fall that saw bitcoin shed 23% in just under 48 hours. It breached the psychologically significant $300 barrier, hitting a 2-week low of $294 before reversing higher.
During the first leg of the drop 20 hours earlier, bitcoin hit $300 on multiple exchanges, but then the selling paused.
It was bitcoin’s first time trading below $300 this month, undoing the last the milestones that it achieved during the rally to above $500. These included entering positive territory in 2015 after 10 months, as well as the 52-week return turning positive.
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Today’s sharp rise continues what was an unexpected burst of volatility after the calmest 9 months of trading since bitcoin’s inception. The volatility is likely to continue until some new equilibrium is reached. According to reports that bitcoin’s price was dragged higher by Chinese investors flocking to a Russian Ponzi scheme, this equilibrium may be lower than the current levels.
Should the decline continue, the bubble would resemble that of November one year ago, after which bitcoin’s declines continued through to the end of the year.
The recent slump was roughly aligned with that in US equity markets over the past three days, albeit on another scale of magnitude. The October rise and August drop are other examples of close correlation.
Litecoin (LTC/USD) has also recovered after plunging to a 7-week low of $2.82, jumping 13% to $3.20 on BTC-e. The LTC/BTC rate crept toward 0.01.