Bitcoin is showing signs of weakness, if only temporarily.
On Monday, the price of Bitcoin dropped 12 percent, to $435.60 from $492.95, according to the virtual currency website CoinDesk, its lowest value since May and far below its peak of about $1,150 last year.
Also on Monday, the price briefly plunged to $309 on BTC-e, an exchange with shadowy backing, although it may have been the result of a glitch and the price quickly recovered to where it was trading before.
The virtual currency had regained some of its value by Monday afternoon, trading around $460.
Bitcoin’s price has been trending downward in recent weeks, but the latest decline after a period of relative stability comes as new regulations and general stock market malaise have taken hold.
New York State’s proposed regulation of virtual currency companies, the Consumer Financial Protection Bureau’s recent warning against digital money and the Bitcoin market’s lack of liquidity may all have contributed to the recent drop, experts said. Europe is also expected to issue rules for Bitcoin.
Those familiar with Bitcoin shrugged off the latest price movement, which they said was well within the typical range for the currency.
“This is just how Bitcoin trades, for better or worse,” said Barry Silbert, who oversees a Bitcoin investment fund through his company, SecondMarket. “This is normal — par for the course.”
Bitcoin’s wild price swings, however, can be jarring, particularly for those who are new to virtual currency. Since Bitcoin was introduced in 2009, its value has gone from just a few dollars to more than $1,000. In any given day, the currency’s price can fluctuate by more than 5 percent.
What makes the recent decline notable is the relative calm that preceded it. The price has hovered around $600 since June and has not fallen below $500 since May, according to CoinDesk.
“What was surprising in some ways was the period when Bitcoin was trading around $600 and not losing much price,” said Steven Englander, a research analyst with Citigroup. “The stability probably means that there isn’t much going on.”
Bitcoin is not the only alternative currency to experience a decline in recent days. So-called altcoins — including Litecoin, which has the second-highest market capitalization behind Bitcoin — have fallen in value across the board, according to the website CoinMarketCap.
A number of recent developments could be influencing Bitcoin’s price. In July, New York became the first state to propose regulations for virtual currency companies. The regulations, introduced by the Department of Financial Services, include rules on consumer protection, the prevention of money laundering and cybersecurity. A “BitLicense” would be required for Bitcoin exchanges and for companies that secure, store or maintain custody or control of the virtual currency on behalf of customers, which some supporters fear is much too broad.
Last week, another regulatory agency, the Consumer Financial Protection Bureau, issued a warning on virtual currency, further igniting fear in the Bitcoin world over possible restrictions.
“Overall, the sense is that regulation is going to impede the growth of Bitcoin, which is contributing the negative sentiment,” said Gil Luria, an analyst at Wedbush Securities. “What’s been weighing on Bitcoin more are shorter-term concerns about whether Bitcoin can develop.”
(Mr. Silbert, the investor, said these regulatory developments amounted to little more than “noise,” and were not likely to have played a big role in Bitcoin’s price movement.)
Analysts and seasoned Bitcoin supporters may not be concerned about the recent dive, but the volatility of late is probably not helping push the currency into the mainstream, experts said. Unlike investors, who often bet on such price swings, more casual users are less likely to adopt a currency whose value is so unpredictable.
“The range of fluctuations in Bitcoin has a dampening effect on consumer enthusiasm,” Mr. Luria said.
This could spell trouble for the growing list of merchants, including Overstock and Dell, who have started accepting Bitcoin as a payment option. Retailers themselves are immune to Bitcoin’s volatility because they accept Bitcoin through a third-party payment processor, which immediately converts the currency to dollars. For consumers to transact in Bitcoin, however, they must hold some of the currency, making them susceptible to any change in price.
Since Bitcoin was introduced in 2009 by a programmer, or group of programmers, it has become increasingly more popular, particularly among investment firms and entrepreneurs. But in part because of its unpredictable price, consumers have remained reluctant to embrace the currency.
And experts, for the most part, do not expect this volatility to go away anytime soon. For one, there is a wide range of possible outcomes for the currency, so any small change in perception can drive a big price swing. In 10 years, for example, one Bitcoin could be worth millions of dollars if it becomes the global capital of trade. But it could also be worth next to nothing if its development is staunched by strict oversight.
“It’s very hard to come up with a fundamental value for Bitcoin,” said Mr. Englander, the Citigroup analyst. “What really defines the price is its reputation and expectations for the future.”