Bitcoin tumbles 20% as fears of cryptocurrency crackdown linger
This week, we woke up to some pretty ugly headlines. For instance, countries like China and South Korea are looking for ways to crack down on cryptocurrencies (See here).
Read on below for more on this story…
January’s cryptocurrency selloff got fresh impetus on Tuesday when Bitcoin slumped as much as 20%, as the prospect of regulatory crackdowns appeared to spread.
While the largest digital coin trimmed its loss and was down 18 percent at $11,444 as of 1 p.m. in New York, it was still at the lowest level since late December, according to composite pricing on Bloomberg. As Bitcoin halted its two-day rally, rival cryptocurrencies also tumbled. Ripple sank as much as 33 percent and Ethereum dropped 24 percent, before both tokens pared some declines.
Speculators across the globe are struggling to determine when or how market watchdogs may rein in an industry that’s decentralized and derives much of its value from anonymous ownership. Many assertions that digital coins represent a bubble have triggered double-digit selloffs over the past year, only to be followed by rebounds.
In South Korea, shutting down cryptocurrency exchanges is still an option, Finance Minister Kim Dong-yeon said in an interview with TBS radio. But measures first need “serious” discussion among ministries, Kim added, holding out hope for traders that a crackdown won’t go that far. Kim said there’s irrational speculation and that rational regulation was needed.
“The finance minister made it clear they’re definitely considering banning crypto trading — and it’s probably the third-largest market,” said Neil Wilson, senior market analyst in London for online trading platform ETX Capital. “The news is hitting prices and broader sentiment, and it follows China’s move to shutter mines.”
China, which first began targeting the industry last year, is escalating its clampdown on cryptocurrency trading, particularly online platforms and mobile apps that offer exchange-like services, according to people familiar with the matter.
“We’ve heard reports that South Korea, China and Japan have considered a shared approach, a path, to regulation,” ETX’s Wilson said, also citing a challenge to digital coins from a bill in the U.S Senate. “It looks like the light touch that has allowed the crypto-boom to explode may be coming to an end,” he wrote in a note to investors.
Lower-than-normal trading in Korea and Japan may have exaggerated the moves in Asia hours on Tuesday, said Mati Greenspan, senior market analyst for the eToro currency platform.
Bitcoin trading using the Korean won was about 3.3 percent of the total among major currencies, compared with more than 10 percent reached on several days over the past two weeks, according to cryptocompare.com data.
Steven Maijoor, chairman of the European Securities and Markets Authority, said investors “should be prepared to lose all their money” in Bitcoin, in a Bloomberg TV interview in Hong Kong. “It has an extremely volatile value, which undermines its use as a currency,” he said. “It’s also not broadly accepted.”
The ESMA warned retail investors against initial coin offerings in November and is monitoring developments in cryptocurrencies, Maijoor said.