Below US$10,000
Bitcoin tumbles 20% as it faces regulatory hurdles
Volatility continues to grip bitcoin, with the largest cryptocurrency falling below the psychological US$10,000, as of press time on Wednesday night after a decline of more than 20% on Tuesday.
With indicators all still in negative territory, the technical charts indicate scope for a drop close to the US$8,000 level.
At 9.05am New York time, Bitcoin dropped 7% to US$9,968, its first foray below US$10,000 since Dec 1, according to Bloomberg. Bitcoin has depreciated by some 14% in the last 24 hours, according to data provider CoinMarketCap.
The alternative digital currency, which is not backed by any firm asset or government, somewhat stabilised from the previous day’s losses earlier in the day but succumbed to more selling pressure later on.
Concerns are mounting of a possibly bigger fall ahead for the digital currency, said registered foreign exchange trading house OANDA Corp’s head of trading for Asia-Pacific Stephen Innes.
“Bitcoin in general could be widely embraced much later. Asian countries seem to be very hefty consumers of the digital currency. The bitcoin is today fairly well subscribed by retail investors, and in the longer term, there is some belief of an inherent value in it due to the blockchain technology,” Innes told StarBiz.
“There is heightened volatility seen pres- ently due to increased actions by market regulators around the world. Speculation is starting to pull back a little due to mounting uncertainty in this area,” he said.
On Tuesday, bitcoin fell to its lowest in more than six weeks to US$10,552 after South Korea’s finance minister said that the country may ban the trading of the digital currency.
South Korea remains one of the world’s biggest users of the digital currency and the South Korean won accounts for roughly 4.4% of the bitcoin trading volume around the world, according to Cryptocompare.
Malaysian-based cryptocurrency specialist Chong Jin Yoong said that the ups and downs in bitcoin trading are normal, but he conceded that the drop on Tuesday was “significant”.
“All this talk about regulators banning and all is nothing new and has been ongoing for the past six months.
“There is talk about South Korea wanting to ban it outright, but I don’t think that is the case. It is more likely that they will make it mandatory for the Koreans to use their actual ID when doing trading from the anti-money laundering perspective,” Chong said.
“Volatility will definitely always be there, but buying opportunities could emerge. I myself have bought a little bit in the last one or two days. However, there is a further possibility that it will drop some more and that whoever intends to go in has to be prepared for a fall,” he added.
Meanwhile, Innes said there is a new environment today due to enhanced regulatory actions by governments around the world.
The existence of bitcoin also capitalises on the disenchantment of the masses toward the global financial system after various financial crashes and blips such as the Global Financial Crisis in 2007-2008, noted an observer.
“Historical dips in bitcoin tended to bottom and then top out with new highs. But there’s a new environment today due to regulatory actions and there is certain resistance that is being put up by governments,” Innes said.
“We have to be cognisant of how much regulatory actions in Asia would eventually spread to other countries. My fear is that it might spread to a wider degree and this could be the death of the product as a proper trading instrument,” he added.
He said that the institutional side of the market’s tendency is to sell, as the market goes back to the more sophisticated trader with regulatory oversight stemming any upward trajectory in the near term.
A trader noted that volatility in bitcoin had picked up noticeably after futures trading on the alternative currency was made available on the Cboe Futures Exchange, LLC from Dec 10. “The sophisticated investor can now short the bitcoin futures with much ease in the market,” the trader said.
A technical analyst said that current technical indicators suggest a strong correction is taking place, with the slow-stochastic giving a “sell” signal on Tuesday.
The daily moving average convergence/ divergence histogram, meanwhile, moved below the neutral line to signal downward momentum, the technical analyst added.