Bitcoin’s value plunged to below the key level of $8,000 today amid fears of government crackdowns on digital currencies after US regulators launched an investigation into the sector this week.
Its lowest point of $7,695 represented a fall of 15 per cent from its price at midnight GMT of $9,050 and was 55 per cent below its 2018 peak of $17,135 hit on 6 January.
The leading cryptocurrency looks set to end a week of gut-wrenching falls with at least $50billion wiped off its value, even after it staged a slight recovery at lunchtime to stand at $8,400.
Many casual investors who bought in around Christmas could be looking at even bigger paper losses as Bitcoin peaked at just below $20,000 on 16 December.
Fall from grace: Bitcoin hit world headlines last year after its value rocketed to $20,000
The digital coin’s fall from grace comes after the US Commodity Futures Trading Commission began looking into virtual-currency venue Bitfinex and Tether earlier this week, dragging down values across the sector.
Tether issues its own coin, said to be equivalent to $1, and claims to have physical dollars to back up some two billion Tether coins in circulation – something that the group behind the digital currency have not managed to prove.
Bloomberg reported that the regulator has begun scrutinising the companies, which both refused to comment other than to say they ‘routinely’ receive notices from law enforcement agencies.
The Indian government has also played a part in the collapsing value of Bitcoin after the country’s finance minister said they were considering banning the digital coin.
The recent criticism comes just a week after British Prime Minister Theresa May said more regulatory attention should be paid to Bitcoin amid concerns drug dealers were using it to launder money.
End of the ride? Bitcoin’s value has seen a series of drastic falls this week
In its early days Bitcoin was a currency often used in the trade of goods on the ‘Dark Web’ – known as a hub for criminals to trade illegal goods.
Other big players in the digital currency world have seen values hit too.
Ethereum, the second biggest cryptocurrency by market cap, was down 25 per cent on Friday and has lost 14 per cent of its total value over the past month.
Rollercoaster: Bitcoin’s value rocketed over the last year, but has seen steep falls since hitting highs of nearly $20,000
A further currency, Ripple, fell more than 30 per cent and has lost 71 per cent of its value in the year to date.
Bitcoin has traded close to the $8,000 mark after which support for the digital currency from investors may crumble.
Neil Wilson, a market analyst with ETX Capital, said it would be relatively easy to see Bitcoin’s value rise from current levels back to $9,000, but it could sit at a lower value of $7,800 or see a major sell off.
‘The next key support would be the 200-day moving average currently around $6,200 – if the price cruises beneath this level there is a chance of a major selloff that wipes out last year’s gains.
‘On the upside, a bounce from $8,400 brings the $9,000 handle quickly back into focus. Trying to catch the falling knife is a risky game.’
‘The wheels are coming off the bitcoin bandwagon,’ Wilson added.
WHAT ARE CRYPTOCURRENCIES?
A cryptocurrency is a digital currency that can be used for transactions online.
It is the internet’s version of money – unique pieces of digital property that can be transferred from one person to another.
All crytocurrencies use ‘blockchain’ and one can only be made and shared using specific agreed-upon rules. For each cryptocurrency the rules are slightly different.
Bitcoins are lines of computer code that are digitally signed each time they travel from one owner to the next. Physical coin used as an illustration
People can buy bitcoins through exchanges such as Coinbase and Bitfinex.
Bitcoin was the first cryptocurrency, created eight years ago.
Other currencies such as Litecoin and Dogecoin do the same thing but have slightly different levels of inflation and rules surrounding transactions.
Currently around 270,000 transactions are taking place every 24 hours.
These currencies don’t exist as physical or digital objects. They are just a collective agreement with other people on the network that your currency was legitimately ‘mined’.
Blockchain is the record of changes in ownership of in a currency which is broadcast through the network and maintained by computers around the world.
The network works by harnessing individuals’ greed for the collective good.
A network of tech-savvy users called miners keep the system honest by pouring their computing power into a blockchain, a global running tally of every bitcoin transaction.
As long as miners keep the blockchain secure, counterfeiting shouldn’t be an issue.
However, because cryptocurrencies allow people to trade money without a third party getting involved, they have become popular with libertarians as well as technophiles, speculators — and criminals.
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