Bitcoin’s price has tumbled, falling by more than 25 per cent over the past seven days.
At one point today, it was worth just half as much as it was a month ago. That’s an enormous decline, and investors are concerned that they may be about to lose money.
Here’s the latest on bitcoin and why its value has plummeted.
Why has bitcoin’s price fallen?
The price of the cryptocurrency rapidly declined after it emerged that South Korea could be on the verge of banning bitcoin trading altogether.
“There are no disagreements over regulating speculation,” such as using real-name accounts and levying taxes on cryptocurrency trading, Finance Minister Kim Dong-yeon is reported to have said this week.
He added that shutting down digital currency exchanges is “a live option but government ministries need to very seriously review it”.
Even if such a ban fails to materialise, South Korea could still impose strict new regulations on the market. Measures under discussion reportedly include bans on underage investors and anonymous trading accounts.
That’s not all bitcoin holders are worried about.
China is also said to be considering cutting off access to online services – both foreign and homegrown – that allow people to trade digital currencies, such as exchange websites.
Such measures would discourage the use of digital currencies altogether.
Nothing concrete has been announced yet, but the speculation appears to have caused a huge amount of panic, with people now fearing the worst and looking to sell off their holdings as soon as possible.
At the same time, others will be tempted to buy up bitcoin now, while it’s relatively cheap, in the hope that the decline is only temporary.
Is the drop surprising?
Bitcoin is notoriously volatile, and it has suffered huge declines before.
After hitting a record high when it passed the $19,850 mark in mid-December, it tumbled rapidly, falling to below $12,000 within days. At one point, its value dropped by almost $2,000 in a single hour.
However, right now there are serious fears that a huge crackdown is coming.
If the trading of digital currencies is eventually banned in China and South Korea, bitcoin’s price could fall even further.
At the same time, the value of the notoriously volatile cryptocurrency has fluctuated unpredictably for weeks, and nobody truly knows whether it is about to rise or fall spectacularly.
Have ethereum, Ripple XRP and other altcoins dipped?
Astonishingly, all of the other top 10 digital currencies by market capitalisation have plummeted even further than bitcoin over the past 24 hours, according to CoinMarketCap.
While bitcoin has declined by 12.65 per cent since yesterday, ethereum is down 17.45 per cent and Ripple XRP is down 21.05 per cent, at the time of publication.
Bitcoin Cash and Cardano, the fourth and fifth biggest digital currencies by market capitalisation, have fallen by 20.18 per cent and and 17.97 per cent, respectively.
In fact, all of the top 20 digital currencies by market capitalisation are in the red.
These falls are, once again, tied to fears that trading digital currencies could soon be banned.
Ahead of this week, bitcoin alternatives had soared in value. A large number of people are thought to have invested in them in the hope that they would go on to surge like bitcoin.
What do financial experts say?
A multitude of financial experts have described bitcoin as a bubble, which could keep inflating until it completely collapses.
It has been labelled a “huge scam”, a “dangerous speculative bubble” and compared to an infamous historical crash involving tulip bulbs.
Billionaire investor Warren Buffett recently said he has no plans to invest in bitcoin or any other cryptocurrencies, because he doesn’t know “anything” about them.
One way or another, bitcoin is going to be crushed by the authorities
“In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending,” he said. “When it happens or how or anything else, I don’t know.”
On the other hand, JPMorgan chief executive Jamie Dimon has now said he “regrets” calling bitcoin “a fraud”, and believes blockchain, the technology behind bitcoin, is “real”.
The overwhelming consensus amongst financial experts, however, is that its price will eventually crash.