Bitcoin prices plunged some 40 per cent this week to below US$12,000 (S$16,125) yesterday, sparking a bout of bargain hunting here and network congestion that saw two bitcoin machines suffering shutdowns a second time in two weeks.
Despite the price drop and warnings from global regulators that bitcoin is a risky investment, some investors here saw it as an opportunity and were buying the cryptocurrency at an ATM at the newly opened Ducatus Cafe in Robinson Road yesterday.
"The price has dropped very dramatically, so we decided to buy more today," said Ms Vivien Tu, a China national who bought $1,000 worth of bitcoins at Ducatus Cafe's bitcoin machine as two other ATMs at Tiong Bahru Plaza and Hong Lim Complex were down.
"I've made a few thousand dollars from bitcoin purchases since September this year. I'm buying for investment as prices have dropped."
Bitcoin Exchange founder Zann Kwan told The Straits Times yesterday that her two machines have been down for a few days due to network congestion - the second time since Dec 8 when bitcoin prices crossed US$16,000.
"It is taking too long for confirmations to come in. We will wait for the current backlog to clear first before we switch on the machines again," she said.
Bitcoin is a form of digital currency, created and held electronically. It is the best-known and largest cryptocurrency by market capitalisation at nearly US$200 billion.
The digital currency is on track for its worst week since 2013 after skyrocketing more than 1,800 per cent since the start of the year to a record US$19,511 on Dec 18.
It has fallen daily since then, with prices hitting as low as US$10,834 yesterday, down 30 per cent on the day, according to Coindesk.
Analysts say one trigger could be reports that South Korean cryptocurrency exchange Youbit is facing bankruptcy following a massive hack on Tuesday that caused it to lose 17 per cent of its assets.
The hack came as San Francisco-based exchange Coinbase said it was investigating staff for insider trading after a jump in the value of bitcoin cash, a clone of bitcoin.
Mr Stephen Innes, the head of trading for Asia Pacific at retail foreign exchange broker Oanda Corp in Singapore, said yesterday: "The rally over the last couple of months has left bitcoin vulnerable to this kind of move and it seems the run-up to Christmas has triggered some profit-taking on the rally and even a shift into some alternative coins."
Bitcoin has had a tumultuous week as warnings about the risks of investing in volatile and unregulated cryptocurrencies have continued to ring louder. The Monetary Authority of Singapore on Tuesday issued an advisory to act with "extreme caution" and to "understand the significant risks".
But some industry observers see the correction as a temporary one.
Mr David Dobson, chief executive of Australia-based Game Tester, which is opening its regional headquarters in Singapore next year, believes bitcoin prices could drop another US$1,000 to US$2,000 before more bargain hunters jump in. "There's still a lot of pent-up demand for bitcoin," he said.
Others said volatility is nothing new for bitcoin, especially in the light of an even bigger retracement a few years ago in bitcoin's prices to around US$418. This was after Mt Gox, the oldest and once-largest bitcoin exchange, went offline after hackers stole about US$450 million worth of bitcoins from the Tokyo-based exchange in February 2014.