The cryptocurrency bubble could be set to burst as Bitcoin suffered a serious fall in value, with investors scrambling to sell.
At the start of the year, it was setting record breaking numbers, surging past $42,000 for the first time in history.
Many investors were backing Bitcoin to become a mainstream method of payment, especially when PayPal started to offer the cryptocurrency in October 2020.
But in the space of 24 hours, Bitcoin has been struck by a 23% drop in value, falling to $31,800.
The digital coin had more than quadrupled in value since the start of 2020, with the currencyâ€™s total value surging past $US600 billion ($A780 billion).
But since Friday, Bitcoin has been wiped of $US180 billion ($A240 billion) in value.
Lesser known cryptocurrencies fared even worse than Bitcoin. Ether lost 29% in 24 hours after peaking at $1,300 two days ago before falling to $980, while Bitcoin Cash and Litecoin also suffered large losses.
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The UKâ€™s financial watchdog issued a stark warning about cryptocurrency on Monday, due to concerns around consumer protection, price volatility, product complexity, charges and fees and marketing materials.
â€œIf consumers invest in these types of products, they should be prepared to lose all their money,â€� the UK Financial Conduct Authority said.
There is no guarantee that cryptoassets can be converted back into cash, the regulator also cautioned.
â€œConverting a cryptoasset back to cash depends on demand and supply existing in the market,â€� it said.
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Scott Minerd, chief investment officer at global firm Guggenheim Investments, had predicted Bitcoin could reach highs of $400,000 one day, but tweeted on Monday that it was â€œtime to take some money off the tableâ€�.
â€œBitcoinâ€™s parabolic rise is unsustainable in the near term,â€� he wrote.
But Chad Steinglass, head of trading at digital assets firm CrossTower, said while fear of missing out had driven frenzied buying of Bitcoin, equally a surge in selling could also spook investors.
â€œAs retail investors are reminded of the fact that prices can indeed go down and are not just a one way rocket ship, the mental perception of risk premium shifts and the fear of missing out gives way, at least marginally, to the fear of suffering losses,â€� he told Forbes.
Mr Steinglass said there was a possibility new institutional money and retail players could invest this week, balancing out current losses.
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