Bitcoin Plummets To Its Lowest Price In Over A Year — Here's What's Going On
On Tuesday, the value of Bitcoin hit a new 2018 low, dropping to $4,500. The price is now near October 2017 levels, right before the cryptocurrency made its astonishing ascent to a high of over $19,000 in December 2017. So what's going on?
Bitcoin Cash's Hard Fork Causes Market Uncertainty
Bitcoin Cash underwent a hard fork last week, which has unsettled markets. The effects have primarily hit Bitcoin Cash's value, but Bitcoin also felt the pain:
The events mark a continuation of the unsettled conditions sparked Nov. 15 when altcoin Bitcoin Cash (BCH) experienced a contentious hard fork, which has since resulted in the emergence of two separate competing chains. While BCH initially held onto much of its value, the 24 hours to press time saw a U-turn for investors, BCH/USD shedding almost 40 percent to test support at $200. While BCH firmly took the lead as the worst performer of the top twenty cryptoassets, others also suffered heavy losses.
Market Manipulation Fears
Bloomberg reported on Tuesday that the feds are looking into whether the 2017 price spike was the result of market manipulation through the use of the stablecoin tether:
Another factor in Bitcoin falling below $4,225 Tuesday: Scrutiny by government officials, who've repeatedly warned that the mostly unregulated industry is likely rife with fraud. A focus of the Justice Department's investigation is whether the dramatic rise of digital tokens in recent years was purely driven by actual demand, or was partially fanned on by market tricks. Along with the CFTC, prosecutors have been looking into a number of trading strategies, including spoofing — the illegal practice of flooding the market with fake orders to trick other traders into buying or selling, Bloomberg reported in May.
Concerns about tether have long existed in the public sphere, with researchers at the University of Austin publishing a study this summer linking the stablecoin's issuance with bitcoin's 2017 price pumps. The two found that even a small amount of tether used to buy bitcoin would help prop up the world's oldest cryptocurrency's price.
[Coindesk]
But according to critics, Tether and Bitfinex, which is registered in the Virgin Islands and is effectively unregulated, also helped fraudulently inflate the overall market. One accusation is that Bitfinex permitted ICO or altcoin issuers to inflate the impression of interest in their tokens through so-called wash trading, and Bloomberg says investigators may examine activity on the exchange itself. More profound, though, are long-running accusations that Bitfinex has fraudulently issued the Tether stablecoin to prop up the price of bitcoin.
The SEC's Regulatory Crackdown
Last Friday, the SEC announced settlements with two companies behind multimillion dollar ICOs, sending shockwaves through the crypto market:
By forcing Airfox and Paragon to refund their token sales, the SEC is putting every company that did an ICO on alert, because the vast majority of them did exactly what those two companies did. None of this should come as a surprise to anyone who has been paying attention.
Casual Investors Are Done
After the 2017 spike, Bitcoin has been a long downward trajectory. One possible culprit — people no longer see buying it as a speculative risk worth taking:
Bitcoin saw volume spikes last year from a combination of people investing in the digital token and speculators wanting to profit from its up and down moves regardless of its underlying value, he said. Now that the price has stabilized, there's less speculation, he added.
