Bitcoin prices plunged to a 12-week low below $6,000 this morning, reporting double-digit percentage losses amid a continued crypto market sell-off.
Prices on CoinDesk’s Bitcoin Price Index (BPI) fell as low as $5,967.34 at 07:59 UTC – the lowest level since Nov. 13. As of writing, the world’s largest cryptocurrency by market capitalization is changing hands at $6,156, down around 22 percent on a 24-hour basis.
Some virtual currency enthusiasts argue that the problems are no different from what has happened in other booms, like the internet bubble of the 1990s. But even true believers say the design of virtual currencies — meant to cut out middlemen and government authorities — has made bad behavior more prevalent amid this particular bubble.
“Cryptocurrencies are almost a perfect vehicle for scams,” said Kevin Werbach, a professor at University of Pennsylvania’s Wharton School. “The combination of credulous buyers and low barriers for scammers were bound to lead to a high level of fraud, if and when the money involved got large. The fact that the money got huge almost overnight, before there were good regulatory or even self-regulatory models in place, made the problem acute.”
The fall from the peaks of early January has been dizzying. The value of all outstanding virtual currencies has been cut by more than half, down over $400 billion as of Monday, according to the website Coinmarketcap.com.
In January, the heads of the main regulators wrote in The Wall Street Journal that the situation presented an unprecedented challenge. “These markets are new, evolving and international,” Jay Clayton, the Securities and Exchange Commission’s chairman, and J. Christopher Giancarlo, his counterpart at the Commodity Futures Trading Commission, wrote. “As such they require us to be nimble and forward-looking.”
Government agencies in the United States have shut down a few notable frauds. Early last month, securities regulators in Texas and North Carolina issued cease-and-desist orders to BitConnect, an operation that had grown to be worth $3 billion.
But those moves only came after BitConnect had operated openly for months, collecting hundreds of millions of dollars from people around the world despite being labeled a Ponzi scheme by many prominent people in the virtual currency industry. BitConnect offered tokens on a decentralized network, similar to Bitcoin, but promised regular payouts to coin holders.
But regulators have not gotten near most of the brazen schemes that have popped up in the past year, many of which had been attacked by hackers first, or simply shut down by their operators after money had been raised.
A new virtual currency, Proof of Weak Hands Coin, whose creators referred to it as a Ponzi scheme on Twitter and use a pyramid as a website logo, raised $800,000 before hackers got into its systems last week and drained its funds. Another pyramid scheme, MMM, which was shut down in an earlier incarnation by the Russian government, has been revived thanks to the popularity of Bitcoin and is operating openly, with particular success in Africa.
Bitcoin is trading at the lowest level since mid-November when a corresponding surge in Bitcoin Cash saw Bitcoin prices fall below $US6,000.
Bitcoin Cash hasn’t been immune from the latest selloff and has fallen below $US1,000 — also for the first time since November.
As Bitcoin continues to break through key technical support levels it indicates further falls to come, according to Greg McKenna from AxiTrader.
“Increasingly this is looking like a falling knife no one wants to catch. And why would you right now? It’s not obvious what a circuit breaker to this weakness will be, or might emerge from,” McKenna said.
The chart below illustrates McKenna’s view of the latest price action.
“This could end up a full round trip back into the $US1850 / $US2966 region,” he said.
Most of the other major cryptocurrencies have fallen by between 40-70% over the last month, amid increasing scrutiny from global regulators.
Overnight, UK bank Lloyd’s announced that it would ban cryptocurrency transactions using credit cards from the bank.
That followed reports from China that authorities have banned access to both domestic and foreign cryptocurrency exchanges.
This table from Markets Insider summarises the price action of the major cryptocurrencies over the past month: