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Bitcoin bubble begins to burst, price plunges 60%

April 10, 2013: 4:17 PM ET

The price of Bitcoins, which has surged nearly 20-fold this year, plunged 60% Wednesday.

It may be the beginning of the end for the Bitcoin bubble. The price of the virtual currency, which has increased almost 20-fold this year, plunged 60% Wednesday in the span of just five hours.

Bitcoin prices hit a high of $266 earlier in the day before dropping as low as $105 in choppy afternoon trading. It later bounced back to about $145, but that's still about 45% below the high.

The currency, which was created by an anonymous hacker just four years ago, has gained particular attention this year in the wake of a mini-bank run in Cyprus  that raised concerns about the health of government-backed paper currencies like the euro and the U.S. dollar.

The rapid run-up sparked speculation about a Bitcoin bubble forming. 

Related: Bitcoins are a bubble

Jesse Colombo, an independent financial analyst and investor who keeps close tabs on bubbles at TheBubbleBubble.com, said the vertical jump in prices was a indicative of a "mania phase," and predicted Bitcoin prices will eventually retreat to pre-mania levels of less than $15 apiece.

Given that the Bitcoin market is relatively small (about $2.5 billion), it won't take much for a bubble to pop.

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Hibah Yousuf
Hibah Yousuf
Reporter, CNNMoney

Hibah Yousuf is a reporter at CNNMoney, where she covers stocks, bonds, commodities and currencies trading across the globe, as well as corporate earnings and other markets-related news. Prior to joining the site in 2009, she interned at Money Magazine.

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