CoinDesk reported earlier this week that Bitcoin prices nosedived to the lowest the cryptocurrency has been in 3 months. The cryptocurrency dropped to below $6,000, shedding more than 22% of its value. Since the beginning of this year, the world’s most popular cryptocurrency has dropped more than 50% of its value. Earlier this week, the cryptocurrency dropped to $5,947.40.
The Bitcoin’s dramatic drop in prices since the beginning of 2018 have largely been due to worries about increased regulations, reported CNBC. South Korea’s violent objection to the Bitcoin frenzy that gripping the country was the starting point of the downslide. Rumbles of discontent from various segments were already present, but when the South Korean government put its foot down, things began to go south.
This was followed by China’s clamp down on Bitcoin mining. The country stated that Bitcoin mining was consuming too much energy. Price manipulation is also another concern that many companies as well as financial institutions have about cryptocurrencies.
Another factor that hurt the cryptocurrency market is the lack of security in trading. There have been numerous security breaches leading to thefts of millions of dollars’ worth of cryptocurrencies across many exchanges. In fact, the latest one that took place in Japan last week, where Japanese crypto exchange Coincheck was robbed of more than $530 million dollars’ worth of cryptocurrencies.
On Friday, Bank of America, JP Morgan Chase & Co and Citibank banned their customer from using credit cards to buy cryptocurrencies. Reasons cited were the extreme volatility in the cryptocurrency markets as well as the high risk involved in dealing with digital currencies. A JP Morgan Chase spokesperson did say that the situation would be reviewed based on how the cryptocurrency market evolved.
The South China Morning Post reported that last week the Chinese government had stepped up its efforts to restrict digital currency trading platforms. They were especially targeting those platforms that had moved overseas after Chinese authorities banned ICOs in the country in September last year.
Interestingly enough, Fortune reports that a survey of about 3,000 people was conducted by CoinDesk in mid-January. According to the results of the survey, almost 20% of the people who own cryptocurrencies, especially, Bitcoin, have gone into debt to buy up as much of the digital currencies as they can. In fact, this is the main reason why JP Morgan Chase & Co, Citibank and Bank of America banned the use of credit cards to buy cryptocurrencies. The banks are worried that borrowers will not be able to repay their debt.
The good news is that the cryptocurrency markets seems to be steadying itself after its freefall in the last few weeks. CNBC reported that the top cryptocurrency’s price shot up by $2,000 in just 24 hours, going up by 9.5% on Wednesday.
Towards the end of the week, most of the top 15 cryptocurrencies based on market capitalization had showed gains in the double-digits. Neo was the biggest gainer, going up 45%.
This upswing was directly attributable to the Senate Banking Committee hearing that took place mid-week. The US Securities and Exchange Commission and the Commodity Futures Trading Commission heads testified before the Senate Banking Committee about their efforts in regulating cryptocurrencies.
While both leaders emphasized protection of consumers as the main target, they said it should be done without a banning the development of cryptocurrencies. The chairmen of both organizations also said that Treasury Secretary Steven Mnuchin was forming a team from multiple Federal agencies to work together to regulate the cryptocurrency industry.
Bitcoin is currently trading up at $8,720.1.