LONDON/TOKYO: Bitcoin fell as much as 20 percent on Wednesday, piercing below $10,000, while other cryptocurrencies took similar spills due to investor fears that regulators could clamp down on them in an effort to curb speculation.
The world’s biggest and best-known cryptocurrency at one point lost 30 percent of its value since Tuesday. Bitcoin, despite some stabilization in late U.S. trading, was half its record peak of almost $20,000 set on the Luxembourg-based Bitstamp exchange a month ago.
“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 fallouts,” 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 United States vowing to investigate cryptocurrencies, there are concerns that global coordination on how to regulate them will accelerate.
Officials are expected to debate the rise of bitcoin at the upcoming G20 summit in Argentina in March.
“Cryptocurrencies could be capped in the current quarter ahead of the G20 meeting in March, where policymakers could discuss tighter regulations,” said Shuhei Fujise, chief analyst at Alt Design.
Reversal of fortunes
The current rout in bitcoin and other digital currencies was a far cry from their dramatic run-up in 2017 when mainstream investors jumped on the bandwagon and as an explosion in so-called initial coin offerings (ICOs) – digital, token-based fundraising rounds – drove demand.
“Bitcoin is deciding whether this is the moment to crash and burn,” said Steven Englander, the head of strategy at New York-based Rafiki Capital.
Bitcoin has plummeted before.
There have been nine instances including the current selloff going back to 2011 where bitcoin’s price was halved on the Bitstamp exchange. The last time was from November 2014 to January 2015.
On Wednesday, Bitcoin fell as low as $9,222 on Bitstamp, its lowest price since Dec. 1, as CBOE and CME bitcoin futures tumbled to contract lows.
Separately, a senior Chinese central banker said authorities should ban centralised trading of virtual currencies as well as individuals and businesses that provide related services.
“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,” Englander said.