Cryptocurrencies selling off on fears of tighter clampdown
Bitcoin slumped, dragging down smaller rivals such as ether and litecoin, as concerns that regulators will tighten their grip on the market weigh on the world’s largest cryptocurrency.
Regulators in China and South Korea are increasing oversight on cryptocurrency trading and mining, while the U.S. Securities and Exchange Commission late last year started cracking down on some digital token sales, known as ICOs.
These actions are spurring speculation demand in the biggest markets for digital assets may wane.
“News on the regulatory front is dragging down cryptos,” said Gabor Gurbacs, director of digital-asset strategy at VanEck Associates Corp. “South Korea and China tightening is weighing on bitcoin and in the ICO market, things started slowing down, with the SEC cracking down on illegal offerings.”
Bitcoin slumped as much as 17 per cent to US$14,820, the most in more than two weeks. The rout in bitcoin is part of a broader sell-off in the cryptocurrency realm, with all of the top 10 by market cap falling, and most tumbling by at least 10 per cent, according to Coinmarketcap.com.
China plans to limit power use by some bitcoin miners, people familiar with the matter said last week, a potential challenge to an industry whose energy-intensive computer networks enable transactions in the cryptocurrency.
South Korea began inspections at six banks, including Industrial Bank of Korea, that provide virtual accounts to companies related to cryptocurrency trading, to clamp down on potential money laundering.
The nation last month said it will restrictively allow cryptocurrency trading on only qualified exchanges and review a possible capital gains tax on crypto trading as a way to restrain the nation’s frenzied speculation.
Naeem Aslam, chief market analyst at TF Global Markets in London, said the increased regulatory oversight will weigh on prices in the short term, but should be positive in the longer term.
“We need regulators to look into the space more closely, the Korean exchanges have become crazy in terms of price differences so these regulatory actions would help the price stability,” Aslam said.