21 July 2019
Following a massive slide this week, bitcoin is down almost 50% from its record high near US$20,000 hit in mid-December. Photo: Reuters
Following a massive slide this week, bitcoin is down almost 50% from its record high near US$20,000 hit in mid-December. Photo: Reuters

Cryptocurrencies plunge on regulatory crackdown fears

Bitcoin lost a quarter of its value in early Asian trading hours on Wednesday amid mounting fears of a regulatory crackdown on cryptocurrencies, with investors unnerved by reports suggesting potential action from South Korean and Chinese authorities.

Bitcoin was down 25 percent at US$10,182 on the Luxembourg-based Bitstamp exchange, Reuters reports.

In Tuesday trading, the unit tumbled as much as 18 percent to hit a four-week low, triggering a selloff across the broader cryptocurrency market.

Bitcoin’s biggest rival Ethereum was down 23 percent on the day at one point, while the next biggest unit, Ripple, plunged by as much as a third.

Traders fretted over media reports from South Korea and China that warned of possible government moves to tamp down the virtual currency mania.  

South Korea’s Finance Minister Kim Dong-yeon told a local radio station that the government will come up with a set of measures to clamp down on the “irrational” cryptocurrency investment craze, Yonhap news agency reported.

Earlier, on Monday, Korean authorities said the plans to ban virtual coin exchanges had not yet been finalized, as government agencies were still in talks to decide how to regulate the market.

The latest Korean news came after a report that Chinese authorities are seeking to block domestic access to homegrown and offshore platforms that enable centralized trading of cryptocurrencies.

China shut down exchanges operating on the mainland last year – a move that also sparked a selloff, though the market later recovered.

“It’s mainly been regulatory issues which are haunting (bitcoin), with news around South Korea’s further crackdown on trading the driver today,” Think Markets chief strategist Naeem Aslam, who holds what he described as “substantial” amounts of bitcoin, Ethereum and Ripple, told Reuters.

“But we maintain our stance. We do not think that the complete banning of cryptocurrencies is possible,” he said.

Lukman Otunuga, a research analyst at FXTM in the UK, said bitcoin could suffer more losses in the near term. 

“With reports on a renewed crackdown on the cryptocurrency in China fuelling anxiety over future restrictions, further losses could be on the cards,” he told Reuters. 

“The sharp depreciation witnessed in bitcoin today should remind investors on how explosively volatile and unpredictable the cryptocurrency can be,” he added.

Cryptocurrencies enjoyed a bumper year in 2017 as mainstream investors entered the market and as an explosion in so-called initial coin offerings (ICOs) drove demand for bitcoin and Ethereum.

The latest tumble leaves bitcoin down nearly 50 percent from a record high near US$20,000 hit in mid-December.

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