- Bitcoin down 5% on Friday to a one month low.
- Analysts say the dip is caused by fears of regulation, rumours of an exchange hack, and news of a big seller in the market.
LONDON – Bitcoin is slumping on Friday, down by 5% in early morning trade to trade at a one month low.
Analysts say that the slump is being caused by a string of bad headlines for the sector this week that have dented investor sentiment.
“Our take on this is that the new investors in the space don’t have enough time to analyse what’s happening,” analysts for the London Block Exchange write in its daily market report on Friday.
“The amount of fake or misleading information reported over the past few days, as discussed in yesterday’s report, made the ‘regulation meets Mt. Gox dump and Binance pump’ narrative far too scary. So much so, in fact, that even the more dedicated (but less sophisticated) traders believe it.”
Regulators around the world have been ramping up supervision of the cryptocurrency space this week, with Japanese regulators suspending two cryptocurrency exchanges and the US Securities and Exchange Commission telling crypto exchanges they must register with it. The SEC earlier this month issued a wave of subpoenas to crypto companies.
Jameel Ahmad, Global Head of Currency and Market Research at FXTM, told BI: “It appears that authorities are continuing to closely monitor Bitcoin, and signs of further concerns over regulation do have the potential to keep sending the value of Bitcoin lower.”
At the same time, market confidence has been shaken by news that the trustees of bankrupt former exchange Mt Gox are liquidating its bitcoin holdings. $US400 million-worth has been sold since last September and some market participants have blamed the sales for causing a price crash at the start of the year.
And to add to problems, Hong Kong exchange Binance was hit by rumours of a major hack earlier this week. It’s CEO publically denied the reports on Twitter, saying user withdrawals were paused only for upgrade work.
Charles Hayter, the CEO of CryptoCompare, told BI: “It’s the usual – fears on regulation in the US after ICO subpoenas and exchanges coming under fire, as well as the Binance issues. These are purely behavioural markets and there are huge switches between strong bullish sentiment and fear and panic.”
But London Block Exchange’s analysts add: “On the other hand, more people may just be losing trust – or finally realising their losses for cash – as the good old ‘hodl’ becomes less appealing for professional investors.”
HODL stands for “hold on for dear life” and has become a mantra to many longterm bitcoin investors who believe they should hold the cryptocurrency and ride out any price dips.
Cryptocurrency markets have increasingly been attracting more traditional investors, lured by the volatility and potential returns in the sector. These investors are likely to have more active trading strategies that are less likely to simply provide price support.