What a difference a day makes. This time yesterday, bitcoin was on course to hit a three-year high. Today, it's hovering well below $1,000.
Yesterday the cryptocurrency peaked at $1,151.03 before promptly falling almost 20 per cent, wiping $180-odd off its value.
Today it extended those losses, falling 11 per cent to $895.19. Yikes.
The rally came days after bitcoin was named the world's best-performing currency for the second year in a row, after it rose 126 per cent in a single year – compared with just 22 per cent for the Brazilian Real, the second-best performer.
That said, in 2014 it was the worst performer, losing 56 per cent of its value – which gives an indication of the kind of volatility bitcoin investors can expect.
"Long-term investors in bitcoin will be used to a degree of instability, with instability and illiquidity two of the major drawbacks of trading the digital currency," said Joshua Mahony, market analyst at IG.
He added that speculation over activity in China may have given rise to the sudden surge in interest.
"Amid speculation that the Chinese are using bitcoins to navigate restrictions on foreign currency purchases, investors will hope this isn’t a precursor to Beijing implementing new controls on the purchase of cryptocurrencies."