The value of bitcoin has fallen below $200 (£131) for the first time since 2013 as the cryptocurrency continues to slump. Since the start of the year bitcoin has lost nearly 40 percent of its value, having started 2015 at around $313 (£206).
In December 2013 bitcoin hit a record high of $1,200 (£715, at that time) but has since steadily fallen. The latest slump in price is more dramatic, with bitcoin tanking in the past week. The sharp drop could have major implications for the large and costly mines that underpin bitcoin. At the time of publication bitcoin was <a style="background-color: transparent;" href="http://www.coindesk.com/price/">valued at $188</a>.
Earlier this week bitcoin exchange CEX.IO announced a temporary suspension of its cloud mining service. The company said the cost of mining had exceeded profits and mining would only begin again when it was profitable again. If the price continues to fall, more bitcoin mines may be forced to close.
As bitcoin's value is tied to how difficult it is to produce, the currency could be reaching a tipping point. If bitcoin mining continues to be unprofitable then it is likely bitcoin will adjust to make mining easier, with big fluctuations in value the likely result.
With the majority of bitcoin trades taking place in either US dollars of Chinese yuan, the cryptocurrency's value in those two currencies is seen as a key indicator. Bitcoin is currently worth just over ¥1,100 (£116) in China having hit ¥994 (£105) earlier on Wednesday.
Amadeo Pellicce, chief operating officer and co-founder of UK-based bitcoin exchange Coinfloor said that in recent weeks there had been "more supply than demand", which had caused bitcoin's value to fall. He said that large sell-offs by mining companies and other bitcoin holders were also factors. "As with any commodity, bitcoin is only worth what people are willing to pay for it at any given time," Pellicce added. "The fundamentals of the six-year-old currency are stronger today than they have ever been and we think we are going to continue to see many interesting developments in 2015."
This article was originally published by WIRED UK
