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 cryptocurrency has rebounded
slightly, however, and as of 10:05am IST on Thursday it was up to
$11,505
.
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 US trading,
was half its record peak of almost $20,000 set
on the Luxembourg-based Bitstamp exchange a month ago.
Ethereum and
Ripple, the No. 2 and No. 3 virtual currencies, tumbled 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 fallouts," he said,
referring to the collapse of some cryptocurrencies in the recent slump
in prices.
Analysts at Citi said on Wednesday Bitcoin could halve
again in value amid the current rout, adding that a possible fall to a
range between $5,605 and $5,673 "looks very likely to be very speedy".
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 fortunesThe
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, 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 (roughly Rs. 5.88 lakhs) on Bitstamp, its
lowest price since December 1, as CBOE and CME Bitcoin futures tumbled
to contract lows.
The latest market losses stemmed from reports
that South Korea's finance minister said banning trading in
cryptocurrencies is still an option and that Seoul plans a set of
measures to clamp down on the "irrational" cryptocurrency investment
craze.
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.
Bubble burst?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. We expect the volatility to
continue throughout 2018 but fundamentally believe that Bitcoin is still
in a bull market," said Christopher Keshian, co-founder of $APEX Token
Fund.
Ethereum, the second-largest cryptocurrency by market value,
was down 15 percent since Tuesday, according to website CoinMarketCap.
Ripple,
the third-biggest, has lost 18 percent of its value over the past 24
hours and was quoted at $1.03, down (Rs. 65.7) from a high of $3.81 (Rs.
243.2) on January 4.
"The run-up in Bitcoin created a mystique of
one-way trading which is being shaken, but the pricing requires faith
that there will always be demand," Englander wrote in a research note.
"This is far from guaranteed given the existence of alternatives with
better characteristics."
© Thomson Reuters 2018
