Over the past 48 hours of trading, bitcoin has experienced one of the biggest crashes in its history. At press time bitcoin is hovering around the $500 mark.
The price dive was precipitated by Chinese regulators, who recently moved to ban third-party payment firms from dealing with bitcoin exchanges.
The price began tumbling on 16th December, briefly dropping south of $700 and recording a 22% loss in just 24 hours.
Since then, it has lost an additional $200 and earlier this morning the currency hit a low of $479. At press time bitcoin was trading at $542, 20% down from Tuesday’s close of $682.
Bitcoin price drop takes its toll on litecoin
Although some investors believed investing in litecoin would help to broaden and stabilize their portfolio, the events of the last 24 hours appear to have proven them spectacularly wrong.
Litecoin crashed too, almost as if it was pegged to bitcoin, which in some sense it is.
Many exchanges do not offer LTC/USD services and as a result much of the volume is coming from LTC/BTC trades. In other words, when bitcoin goes down, it drags litecoin down with it.
In fact, litecoin charts from the past 48 hours look like a carbon copy of their bitcoin counterparts.
In the early hours of Monday (GMT time) litecoin was trading in the high twenties, but by the end of the day it was going for as little as $22.60.
On Tuesday litecoin shed more value, dropping to $18.53 before it briefly bounced up to $23.30, albeit on relatively light volume.
Wednesday saw another tumble. Although litecoin opened at $19.80 and it quickly passed the $20 mark, this was once again on light volume.
However, five hours later, with volume skyrocking – the price tumbled first to $18.90 and then a low of $13.00 at press time.
In essence, the numbers mimic those of bitcoin, with a slight delay. Volume remains heavy, but the LTC/BTC rate is relatively stable, in the 0.029 to 0.034 range.
The rate is holding steady for now, indicating that litecoin is no safe haven for bitcoin investors.
How bad can it get?
Bitcoin appears to have stabilized north of $500, but at this point it is hard to make any predictions.
Judging by volume and price over the past two days, litecoin is effectively linked to bitcoin, so it may stabilize, provided bitcoin does not slide further.
At press time, litecoin is bouncing back, with recent trades in the $14-$15 range on six-digit volumes.
In other words, even if it weren’t for the relatively stable LTC/BTC rate, moves made by regulators are bound to affect both currencies in exactly the same way.
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