Bitcoin below US$6,200 for first time in three months

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Bitcoin plunged 20 percent to a three-month low on Tuesday, its latest sharp loss following a series of setbacks for the cryptocurrency.

The virtual currency fell to 6,190 US dollars for the first time since mid-November, according to Bloomberg News. That represents the latest hammering for a unit that saw a stratospheric 26-fold rise last year.

Tuesday's collapse comes just six weeks after Bitcoin hit a record high of 19,511 US dollars, fueled by a flood of speculators looking to make a quick buck, with warnings it could fall another 50 percent.

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Since those heady days, the cryptomarket -- which includes dozens of other units -- has been pounded by news of crackdowns by governments including in China, Russia and South Korea, one of the biggest markets for the sector.

China to ban all initial coin offerings

According to China Daily, the People's Bank of China is preparing a package of measures to further restrict initial coin offerings (ICOs), a form of online fundraising where investors receive virtual tokens in exchange for financial backing.

Chinese authorities have previously voiced concerns over the lack of regulations on ICOs, warning investors that they pose significant economic risk.

China's central bank will also look to limit cryptocurrency trading both domestically and overseas, with new regulations set to be launched when "conditions are ripe".

Yang Dong, director of the Fintech and Internet Security Research Center at Renmin University of China, said the potential measures may include tighter supervision on cryptocurrency accounts, especially for overseeing offline money transactions.

Yang also said more attention would be paid to cross-border flows of foreign exchange in overseas ICOs.

"Even though it is difficult to supervise overseas cryptocurrency trading, measures can still be taken including restriction of online trading by blocking Internet accounts, shutting down web servers, forbidding illegal traders from leaving the country and enhancing coordination with overseas regulators," Yang told China Daily.

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He also suggested a "blacklist" of illegal traders of overseas ICOs, calling for them to be banned from working with relevant financial businesses in China.

On Thursday, India said it would "take all measures to eliminate" cryptocurrencies' use as part of a payment system and in funding illegitimate activities, while Japanese authorities raided a virtual currency exchange after it lost 530 million US dollars to hackers.

Central banks in Europe, Japan and the United States have also flagged concerns about the unit and this week saw several commercial lenders say they would stop allowing their customers to buy Bitcoin through their credit cards owing to debt concerns.

Stephen Innes, head of trading for Asia Pacific at Oanda, a New York-based foreign exchange company, said "the dynamics behind the moves are regulatory clampdowns and investors losing confidence in crypto".

Wall Street selloff hits Bitcoin

The sell-off on Tuesday was exacerbated by crushing losses on world stock markets, with the Dow on Wall Street suffering its biggest one-day points loss and wiping out all its 2018 gains.

A Wall Street trader on a tough day on the US markets, February 5 2018. /VCG Photo‍

The global rout comes as panicked investors fret over rising US borrowing costs, leading them to cash in profits after a stellar couple of months that have seen many indexes hit record or all-time highs.

Equities have enjoyed months of surges fueled by optimism over the US economy, corporate earnings and the global outlook.

But while traders have been piling into equities, pushing many global indexes to record or multi-year highs, there has been growing concern on trading floors about elevated US Treasury bond yields -- at four-year highs -- and the likelihood of fresh Federal Reserve interest rate hikes.

As investors flock to safer assets and become more risk-averse, Bitcoin has seen its fortunes fade. "The risk-off tone [of investors] is hitting Bitcoin almost as hard as a global regulator and bank scrutiny," said Greg McKenna, chief market strategist at AxiTrader, an Australian brokerage.

"The latest dent to the Cryptospace has been banks saying they are shutting down the ability of clients to buy Bitcoin with their cards."

Source(s): AFP