Bitcoin tumbled for a fifth day, dropping below $7,000 for the first time since November and leading other digital tokens lower, as a backlash by banks and government regulators against the speculative frenzy that drove cryptocurrencies to dizzying heights last year picks up steam.
The biggest digital currency sank as much as 22% to $6,579, before trading at $7,054 as of 4:08 p.m. in New York, according to composite Bloomberg pricing. It has erased about 65% of its value from a record high $19,511 in December. Rival coins also retreated on Monday, with Ripple losing as much as 21% and Ethereum and Litecoin also weaker.
“Although no fundamental change triggered this crash, the parabolic growth this market has experienced had to slow down at some point,” Lucas Nuzzi, a senior analyst at Digital Asset Research, wrote in an email. “All that it took this time was a large lot of sell orders.”
Weeks of negative news and commercial setbacks have buffeted digital tokens. Lloyds Banking Group joined a growing number of big credit-card issuers have said they’re halting purchases of cryptocurrencies on their cards, including JPMorgan Chase and Bank of America. Several cited risk aversion and a desire to protect their customers.
SEC Chairman Jay Clayton said he supports efforts to bring clarity to cryptocurrency issues and that existing rules weren’t designed with such trading in mind, according to prepared remarks for a Senate Banking Committee hearing Tuesday on virtual currencies.
Bitcoin’s longest run of losses since Christmas day has coincided with investors exiting risky assets across the board, with stocks retreating globally. Bitcoin so far seems to be struggling to live up to any comparison with gold as a store of value, which is an argument made by some of its supporters. Bullion edged higher as other safe havens — the yen, Swiss franc and bonds — also gained.
Regulators in what have been some of the hottest market overseas are also seeking to gain more control of trading. China will block all websites, including foreign platforms, related to cryptocurrency trading and initial coin offerings in an attempt to finally stamp out speculation in the market, according to a South China Morning Post report.
Meanwhile, North Korea is trying to hack South Korea’s cryptocurrency-related programs to steal digital currencies and has already stolen tens of billions of won worth, Yonhap News reported. And authorities in digital-coin powerhouse South Korea and other countries are weighing increased regulatory scrutiny of the industry, news which helped spark the ongoing selloff.
Yet some Bitcoin stalwarts remain unconcerned.
“There are a few catalysts: people paying taxes, and general mean reversion,” Kyle Samani, managing partner at crypto hedge fund Multicoin Capital, said in an email. “Overall, this is probably healthy given the run up in November-January.”