HONG KONG: Bitcoin slowed its decline on Wednesday in the wake of a 23% plunge that rocked the global market for digital assets and sparked deeper questions about its future.
The biggest cryptocurrency slid 2.2% to US$10,487 as of 12:28pm in London, giving up an earlier 10% gain and approaching the US$10,000 level not seen since December.
Its tepid resilience helped buoy other large cryptocurrencies, with ripple and ethereum fluctuating with single-digit gains and losses.
It’s been a week of reckoning for the cryptomarket, with some US$300bil knocked off its market value in three days.
Reports have mounted in various countries of regulators trying to curb an explosion of speculation in digital coins and potential fraud.
Meanwhile Bitcoin’s market share is dropping as research increases into rival names -- from Bitcoin Cash and Stellar to sub-US$1bil coins like Ox, Qash, even Golem.
“Cryptocurrency holders are trying to decide whether to abandon Bitcoin,” said Steven Englander, head of research and strategy with Rafiki Capital.
“The dilemma is that once you stop pricing Bitcoin and its derivatives as new assets that will head to the moon, the pricing model is more conventional and much less breathtaking,” he said in a note to clients.
The sell-off has shaken retail investors, who are considered the mainstay of the investing public, as an asset class that has no conventional valuation model is bewildering for those who are looking to buy the dip.
“I have a zen philosophy that you just go with the flow,” said George Tasick, a part-time cryptocurrency trader in Hong Kong whose day job is making fireworks. “I’m not really changing my behavior in any way.”
Speculators across the globe are struggling to determine when or how market watchdogs may rein in an industry that’s decentralized and derives much of its value from anonymous ownership.
Many assertions that digital coins represent a bubble have triggered double-digit sell-offs over the past year, only to be followed by rebounds.
In South Korea, shutting down cryptocurrency exchanges is still an option amid ongoing discussions, Finance Minister Kim Dong-yeon said in an interview with TBS radio Jan 16.
Kim said there’s irrational speculation and that rational regulation was needed.
“It’s going to be very tough in a liberal democracy like South Korea if you have a huge constituent in the population that’s involved” in cryptocurrencies, said Arthur Hayes, chief executive officer of crypto-coin trading platform BitMEX. “How’s the government going to curtail it and still get votes in the next election? It’ll be very interesting to see how that all plays out.”
China, meanwhile, is set to escalate its clampdown on cryptocurrency trading, targeting online platforms and mobile apps that offer exchange-like services, according to people familiar with the matter.
In the US, state regulators are becoming more active with BitConnect shuttering its cryptocurrency exchange and lending operation after receiving two cease-and-desist letters from the Texas State Securities Board and North Carolina Secretary of State Securities Division for the unauthorized sale of securities and suffering from denial-of-service attacks.
The BitConnect coin was earlier down about 90% in 24 hours.
Hayes said he is telling clients the “extreme” price swings seen in cryptocurrencies are normal and Bitcoin is “not a market that goes up and down in a very measured fashion.” - Bloomberg