Regulatory fears send bitcoin to 6-week low
Speculators beware: The once-high-flying digital currency bitcoin is again feeling the heat from regulators in Asia, sending its price into free fall.
Bitcoin, the best-known cryptocurrency whose skyrocketing price in the past year captured the imagination of speculators and skeptics alike, has come under intense selling pressure early in 2018.
Bitcoin careened 25% lower Tuesday after a startling gain of nearly
1,400% last year and peaking at roughly
$19,500 per coin in late December 2016. The steep drop, which pushed bitcoin to a six-week low of $10,650, was driven in part by news that South Korea, a country whose investor base has been at the epicenter of the bitcoin trading boom, was considering a crypto trading ban. That news collided with a Bloomberg report that Chinese authorities, who already have shut down local crypto exchanges, also planned to block its residents from trading bitcoin on for-
eign exchanges.
The big fear is that hopes for widespread acceptance of the decentralized, stateless digital currency will be derailed by governments. Many countries see bitcoin as a threat to their traditional currencies and worry that mom-andpop investors who speculate in bitcoin will lose a lot of money when the perceived speculative bubble bursts, bitcoin watchers say.
“I think regulation and interference by governments is one of the biggest challenges facing bitcoin,” Craig Erlam, a senior market analyst at currency trading firm Oanda, told USA TODAY.
Cryptocurrencies such as bitcoin are powered by technology known as blockchain, which is akin to a anonymous digital ledger. Bitcoin is trying to distance itself from its early reputation as an anonymous currency used for nefarious purposes, such as money laundering.
What the South Korean authorities are trying to do by shuttering crypto exchanges is to “shut down the betting shops,” says Craig Pirrong, a professor of finance at the University of Houston. “They perceive bitcoin as a speculative frenzy that will not end well.”
As a result, they are trying to minimize future damage to investors by making it more difficult and costly to trade. Bitcoin bulls say this isn’t the first time bitcoin has gone through a rough patch to start the year nor the first time it has been under regulatory pressure.
“The bitcoin story is not over; hold on to your bitcoin,” says David Mondrus, CEO of Trive, a company that counters what it calls “fake news” with the use of blockchain technology.
American regulators also are keeping a close eye on digital currencies.
One U.S. regulator, the Commodity Futures Trading Commission, gave the go-ahead for two U.S. exchanges to start trading bitcoin futures in December. The Securities and Exchange Commission has cracked down on “initial coin offerings,” or digital-coin fundraising vehicles, and has yet to approve exchange-traded funds that would provide easier investor access to investing in bitcoin.