Bitcoin has endured one of its bloodiest weeks ever, losing nearly half its value in a frantic investor sell-off that has tested the resolve of the cryptocurrency's long-term faithful.
The 45 per cent plunge highlights just how absurd bitcoin's price rise was this year. The correction has wiped out about two weeks' worth of gains, bringing the currency back to December 6 levels.
"I was there during the 2013 crash, so unless it drops more than 95 per cent again [I'm] not really fussed," Sydney investor Justin Zhu said. "I actually completely forgot about my bitcoin until someone told me it went over US$1,000 ($1,423) again earlier this year."
The 31-year-old said he had stopped looking at the prices. "A correction is pretty healthy overall, I think," he said.
"There are just a lot of basic issues like transfer time [and] fees that will hopefully be fixed, along with the civil war situation between bitcoin and bitcoin cash that needs to be addressed first."
After testing the US$20,000 ($28,463) milestone on Sunday, bitcoin spent the week in decline before suddenly crashing on Thursday, bottoming out at under US$11,000 ($15,656), according to research site CoinDesk.
That brought bitcoin's market capitalisation — the price multiplied by the number of coins in circulation — from about US$330 billion ($469.7b) to a low of US$186b ($264.7b). By Saturday morning, bitcoin had recovered slightly to trade at about US$14,000 ($19,926).
And it's not just bitcoin. Hundreds of billions of dollars have been wiped off the value of all cryptocurrencies this week, including ethereum, ripple, litecoin and even bitcoin cash.
The bitcoin "fork" has pulled back after spiking following a controversial debut on the Coinbase exchange, which sparked an insider trading investigation and triggered a sell-off in bitcoin.
Between Thursday and Friday, the total cryptocurrency market plunged by more than 35 per cent from a peak market capitalisation of US$654.1b ($930.8b) to US$422.4b ($601.1b) — a loss of US$232b ($330.2b). By Saturday morning, the market had recovered to US$517b ($735.7b).
The wild sell-off prompted Coinbase, the world's largest cryptocurrency exchange, to temporarily suspend trading on Friday, along with two others.
"Due to today's high traffic, buys and sells may be intermittently offline," a notice on the website read. "We're working on restoring full availability as soon as possible and will be posting status updates."
On bitcoin message boards, users resorted to gallows humour. "Bought at US$19,500 AMA [ask me anything]," one reddit user wrote. Others resorted to posting memes, including the Black Knight from Monty Python and the Holy Grail: "It's just a flesh wound."
Another user argued the latest crash was more of a test for long-term holders of bitcoin, known as "hodlers". "The new guys actually have an incentive to continue holding," they wrote. "They got into the crypto game to make money, not lose it. They're going to continue holding until they make their money back or profit.
"The holders from 2016 and earlier could cash out now if they can't handle the pressure. They're already making a lot of money, just less than they would've made a week ago. This is not the same pressure as from two years ago. A LOT more money is involved."
The reason for the massive correction is unclear. Some speculated it was simply profit-taking, while others blamed a co-ordinated conspiracy by banks and hedge funds to tank the market.
Charles Hayter, founder and chief executive of industry website Cryptocompare, told the BBC a lot of traders would have been cashing in on their massive gains to close out the year. "A manic upward swing led by the herd will be followed by a downturn as the emotional sentiment changes," he said.
It came as billionaire former hedge-fund manager Michael Novogratz, an outspoken proponent of bitcoin, announced he was putting plans for a cryptocurrency hedge fund on hold and predicted bitcoin could extend its drop to US$8,000 ($11,389).
"We didn't like market conditions and we wanted to re-evaluate what we're doing," he told Bloomberg. "I look pretty smart pressing the pause button right now."
John Kicklighter, chief strategist at IG Chicago, said the "speculative frenzy" behind bitcoin appeared to be dying down.
"Looking back, 2017 will certainly be considered the year of the cryptocurrency and this particularly larger-than-life coin will be at the centre of this review — but not likely for its virtues," he said in a note on Thursday.
"The surge that bitcoin enjoyed particularly between October and the peak in December was fuelled by the momentum it drove rather than the true financial disruption that true believers had ascribed to it.
"In other words, much of that explosion was purely speculative. Evidence of this can be seen in the numerous stories about the time it takes to settle transactions (days) and the average cost per trade (over US$20).
"These do not match what we would expect from something that is supposedly billed as the replacement of fiat currency."
Kicklighter said if it was "virtuous adoption" of digital currencies, he would have expected alternatives that addressed those specific issues, such as litecoin and ethereum, to have "led the charge".
"They did not," he said. "The question now is how much excess is priced into this market and this coin?"
Earlier this month, the launch of bitcoin futures on two of the largest exchanges, the Chicago Board Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME), was hailed as the volatile currency's mainstream moment, which would trigger a flood of institutional investors.
Futures allow investors to bet on the rise or fall of the currency. Cameron and Tyler Winklevoss, bitcoin billionaires and founders of the Gemini Exchange, which partnered with CBOE for its futures product, said it was an opportunity for the naysayers to put up or shut up.
"This contract actually allows you to short bitcoin," Tyler told Fox News earlier this month.
"Talk is cheap. Now people can put their money where their mouth is, whether that's [JP Morgan boss] Jamie Dimon or someone else, they can be transparent about how much they're personally betting against bitcoin."