Bitcoin’s volatile value has hit its lowest price in almost a year after a gradual downward turn brought on by the way that coins are mined and an increase in the amount in circulation.
The crypto currency dipped to $290 [£181] on Sunday afternoon after dropping by around 18 per cent in value over the course of the weekend and it’s a vast departure from the high of over $1,100 [£684] back in December 2013.
Bitcoin has recovered since and at the most recent check Coinbase’s sell price for the crypto currency sat at $326.17 [£203].
It’s currently unclear what the cause of the latest dip can be attributed to with everything from the increasing number of merchants accepting bitcoins to the vast quantities flooding the market being looked at.
Garrick Hileman, from London School of Economics, explained that the recent swings in value have been caused by speculative trading, however, the long term declines being seen cannot be put down to this.
More likely is that the new supply of bitcoins being pumped into the market by miners is causing it to react, particularly when it comes to the coins that are awarded to those mining that are then used to pay for the power running the machines.
"Approximately every 10 minutes 25 new bitcoins are mined into existence, which works out to approximately 3,600 new bitcoins created every day. At current prices that's $1.2m in new supply coming into existence every day,” he told the BBC. "How much of this $1.2m miners have to sell to pay for these things is a closely guarded trade secret, but unless the market can absorb the new bitcoins which miners sell, the price will fall."
PayPal began supporting bitcoin last month and, even though there was an initial spike in value, its wider usage is expected to contribute to an eventual eroding of the value of bitcoins.
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Even though this is the case, there are plenty of bitcoin backers that aren’t at all perturbed by the drop with most pointing to the fact that it was worth a considerable amount less this time last year before it mushroomed to over $1,000 [£622].