Bitcoin blues:  The cryptocurrency that had many investors knocking up a fortune as its price soared is now wobbling and its price has dropped sharply. Picture: REUTERS
Bitcoin blues: The cryptocurrency that had many investors knocking up a fortune as its price soared is now wobbling and its price has dropped sharply. Picture: REUTERS

Tokyo/London - Bitcoin plunged more than 11% on Wednesday, extending a precipitous downturn in fortunes, with investors spooked by fears regulators might clamp down on an asset the value of which skyrocketed in the past year.

The price of the world’s biggest and best-known cryptocurrency fell to as low as $10,065 on the Luxembourg-based Bitstamp exchange, a six-week low and close to half the peak price of almost $20,000 it reached in December.

Other cryptocurrencies plunged as well. Ethereum and Ripple were both down heavily after reports South Korea and China could ban cryptocurrency trading, sparking worries of a wider regulatory crackdown.

"There is a lot of panic in the market. People are selling to try and get the hell out of there," said Charles Hayter, founder of Cryptocompare, which owns cryptocurrencies. "You have more regulatory uncertainty … and because of these falls, you have these other outfalls," he said, referring to the collapse of some cryptocurrencies in the recent slump in prices.

With South Korea, Japan and China all making noises about a regulatory swoop, and officials in France and the US vowing to investigate cryptocurrencies, there is concern that global
co-ordination on how to regulate them will accelerate.

Officials are expected to debate the rise of bitcoin at the upcoming Group of 20 (G-20) summit in Argentina in March.

"Cryptocurrencies could be capped in the current quarter ahead of the G-20 meeting in March, where policy makers could discuss tighter regulations," said Shuhei Fujise, chief analyst at Alt Design.

At its lows on Tuesday, bitcoin suffered its biggest daily drop in four months.

This was a far cry from its peak close to $20,000 in December, when the virtual currency had risen nearly 2,000% over the year.

Tuesday’s fall came after reports that South Korea’s finance minister had said banning trade in cryptocurrencies was still an option and Seoul planned measures to clamp down on the "irrational" cryptocurrency investment craze.

A senior Chinese central banker said that authorities should ban centralised trading of virtual currencies as well as individuals and businesses that provide related services.

"Bitcoin is deciding whether this is the moment to crash and burn," said Steven Englander, head of strategy at New York-based Rafiki Capital.

"My conjecture is that cryptocurrency holders are trying to decide whether to abandon bitcoin because its limitations mean it will be superseded by better products or bet that it can thrive despite them."

Cryptocurrencies enjoyed a bumper year in 2017 as mainstream investors entered the market and as an explosion in initial coin offerings (ICOs),
digital, token-based fundraising rounds — drove demand.

While many observers say the recent falls show that the bubble has burst, those backing the nascent markets say that regulation is welcomed and wild price swings to be expected.

"The volatility of bitcoin and other cryptocurrencies is an expected, and important, part of the journey to becoming a mature asset class," said Christopher Keshian, co-founder of $APEX Token Fund.

"We expect the volatility to continue throughout 2018 but fundamentally believe that bitcoin is still in a bull market."

Ethereum, the second-largest cryptocurrency by market value, was down 18% since Tuesday, according to website CoinMarketCap.

Ripple, the third-biggest, lost 25% of its value within 24 hours and was quoted at $1.03 from a high of $3.81 on January 4.

Reuters

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