On Tuesday, Bitcoin plunged as much as 18 percent to a four-week low, as concerns regarding a regulatory crackdown spread through the market following reports that suggested that South Korea could still ban trading in cryptocurrencies.
The fall in bitcoin triggered a selloff across the market, with bitcoin’s biggest rival Ethereum at one point losing 23 percent on the day, with the next biggest, Ripple, tumbling by as much as a third.
Bitcoin was trading as low as $11,191.59 (£8,127) on the Luxembourg-based Bitstamp exchange. In New York trading, it moved up to $12,078, still down 11.2 percent.
“With reports on a renewed crackdown on the cryptocurrency in China fueling anxiety over future restrictions, further losses could be on the cards (for bitcoin) in the near term,” said Lukman Otunuga, research analyst.
“The sharp depreciation witnessed in bitcoin today should remind investors on how explosively volatile and unpredictable the cryptocurrency can be,” Otunuga added.
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A South Korean news website reported that Finance Minister Kim Dong-yeon had told a local radio station that the government is creating procedures to crack down on the “irrational” cryptocurrency investment fad. On Monday, South Korea said its plans to ban virtual coin exchanges have not yet been finalized, as government agencies were still discussing how to regulate the market.
A senior Chinese central banker voiced his concerns that authorities should ban centralized trading of virtual currencies and ban individuals and businesses from providing services related to the digital assets. Last year, China shut down exchanges that operated on the mainland which also spared a selloff at that time.
“It’s mainly been regulatory issues which are haunting (bitcoin), with news around South Korea’s further crackdown on trading the driver today,” said chief strategist Naeem Aslam, who holds what he described as “substantial” amounts digital assets. “But we maintain our stance. We do not think that the complete banning of cryptocurrencies is possible,” Aslam added.
The latest plunge leaves bitcoin down roughly 40 percent from a record high of almost $20,000 just last month. “From a technical standpoint, bitcoin is under pressure on the daily charts,” said Otunuga. “The breakdown below $12,000 may encourage a further decline towards $11,000 and $10,000, respectively.”