Bitcoin Crashes 20% Amid Growing Fears Of Crypto Crackdown

As first discussed last night, the selling in bitcoin and across cryptocurrencies - which began as Asia opened, and appeared to be catalyzed by headlines from South Korea's finance ministry that a cryptocurrency exchange shutdown is still an option...

https://www.zerohedge.com/sites/default/files/inline-images/20180115_crypto1.png

... accelerated overnight with bitcoin plunging as much as 20% as the prospect of regulatory crackdowns appeared to spread across Asia. Having traded just above $11,000 this morning, the lowest level since late December, and down more than 40% from its all-time high of $20,000 set just a month ago, bitcoin fell 12.3% to $12,130 as at 7:30am ET.

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As bitcoin halted a two-day rally, rival cryptocurrencies also plunged, and the losses in bitcoin are largely in line with those seen across the cryptocurrency space. As of writing, Ripple (XRP), stellar lumens (STR) and cardano (ADA) are down at least 25 percent on the day each. Ethereum's ether (ETH) token has shed 18 percent in value in the last 24 hours.

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As discussed last night, traders continue to focus largely on South Korea, one of the busiest markets around the globe for cryptocurrencies, where finance minister Kim Dong-yeon said overnight that shutting down cryptocurrency exchanges is still an option, but in what appeared a backtracking from last week's vow to crack down on bitcoin by the Justice Ministry, Kim said that measures first need “serious” discussion among ministries, holding out hope for traders that a crackdown won’t go that far. Kim said there’s irrational speculation and that rational regulation was needed.

“The finance minister made it clear they’re definitely considering banning crypto trading - and it’s probably the third-largest market,” said Neil Wilson, senior market analyst in London for online trading platform ETX Capital. “The news is hitting prices and broader sentiment, and it follows China’s move to shutter mines.”

Meanwhile, according to Bloomberg, China - which first began targeting the industry last year - is escalating its clampdown on cryptocurrency trading, particularly online platforms and mobile apps that offer exchange-like services, although with China no longer a notable player in the crypto space, it is unclear what if any impact further halts of China's already halted exchanges will have, besides just making cryptos that much more attractive of course.

As Reuters adds, a report today says that a PBoC official has said that centralized trading of virtual currencies should be banned, as well as individuals and businesses that provide related services. This is according to an internal memo that refers to PBoC Vice Governor Pan Gongsheng who reportedly said the government would continue to apply pressure to the virtual currency trade and prevent the build up of risks in that market.

“We’ve heard reports that South Korea, China and Japan have considered a shared approach, a path, to regulation,” ETX’s Wilson said, also citing a challenge to digital coins from a bill in the U.S Senate. “It looks like the light touch that has allowed the crypto-boom to explode may be coming to an end,” he wrote in a note to investors.

Also on Monday night, Steven Maijoor, chairman of the European Securities and Markets Authority, said investors “should be prepared to lose all their money” in bitcoin, in a Bloomberg TV interview in Hong Kong. “It has an extremely volatile value, which undermines its use as a currency,” he said. “It’s also not broadly accepted.”

What he really meant is that unlike stocks, traders should not expect a central bank bailout on their crypto investment when things turn rough. Which, of course, is the biggest part of the attraction.

So to summarize the speculated catalysts behind the selloff from CoinDesk:

  • Firstly, comments on social media indicate there is unease in the investor community over talk of a cryptocurrency trading ban in South Korea and further possible crackdowns on trading and mining in China.
  • And secondly, BTC futures contracts are trading at a discount to bitcoin's global average calculated by CoinMarketCap. The January expiry futures contract on the CBOE is trading at $11,510 and CME's is changing hands at $11,530. Meanwhile, BTC spot is trading at $11,816. The discount (futures price lower than spot price) indicates that the market participants are bearish on the underlying asset (BTC).


For the technicians, the chart analysis indicates scope for a drop to below $10,000 levels if the bulls can't muster a response today.

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The above chart (prices as per Coinbase) shows:

  • The rising trendline (blue line) has been breached.
  • A downside break of the triangle pattern, indicating the sell-off from the record high of $19,891.99 9 (Dec. 17 high) has resumed.
  • The relative strength index (RSI) has turned bearish (below 50.00), indicating scope for further losses.
  • The 50-day moving average (MA) has shed bullish bias (flattened).
  • The 5-day and 10-day MAs carry a strong bearish bias (downward sloping).

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Finally, the selling wasn't confined to tokens: U.S. stocks with exposure to cryptocurrencies also plunged in pre-market trading:

  • Riot Blockchain, a diagnostic machinery maker that rebranded as a blockchain company in October, falls 8.1% pre- market
  • Overstock.com, which has a blockchain subsidiary called Medici Ventures, falls 7.5%
  • Kodak, which said this month it’s working with WENN Digital to offer a blockchain-based service for paying photographers, drops 8.7%
  • Metropolitan Bank, the issuing bank for a bitcoin debit card called Shift Card, is down 4.5%. On Jan. 14, Fortune reported that the bank halted all cryptocurrency-related international wires, citing an unidentified Metropolitan customer
  • Seven Stars Cloud Group, which operated as an on-demand video service in China before buying a 51% stake in a blockchain company in June, drops 3.4%
  • Square, which has a bitcoin service on its Square Cash app, falls 2.6%

Other cryptocurrency-exposed stocks to watch, according to Bloomberg, include: OTIV, SRAX, XNET, CRCW, RCGR, AMD, NVDA, MARA, MGTI.

Comments

Moe-Monay null Tue, 01/16/2018 - 07:55 Permalink

This standard for BTC.  You who have not been paying attention just missed the previous occurrences albeit at lower levels.

.........and with the market going parabolic attentions are elsewhere.  Scary parabolic.  It was some what disconcerting before with the relentless march up.  Now it is melting up.  Seems to shout "this is going to be a problem" to me.

In reply to by null

Ghost of PartysOver Moe-Monay Tue, 01/16/2018 - 08:04 Permalink

BTC is a mighty stable form of currency.  Makes CB manipulation look rather mundane doesn't it.

As far as stocks go, I think we seeing the expectation game of massive corporate buyback compliments of the Tax Reform and Repatriation or it is moving into a game of chicken with traders.  Who has the perfect combination of courage and skill?   I am sure I will bail out before the top so you can call Chief Chicken Shiat. 

In reply to by Moe-Monay

FakeNewsBandit Ghost of PartysOver Tue, 01/16/2018 - 08:21 Permalink

Almost time for ZH to roll out their "Crypto Carnage!" headline... the nocoiners rejoice.. someone says something about tulips, someone says aaand its gone, someone says I Told You Bitcon Was A Scam, someone says something about asia. 

Meanwhile those of us who aren't emotional about it are BTFD and watching a familiar pattern play out, albeit on a bigger scale. Next bull run will have you nocoiners in the fetal position crying into your silver stacks

In reply to by Ghost of PartysOver

pods wisehiney Tue, 01/16/2018 - 09:32 Permalink

Now is an interesting time in the crypto sector. It has started to be adopted in the mainstream lexicon and fewer people are outright dismissing it (myself included).  Now we are at the point where it is fought.  Governments are starting to notice it, and take action. Bankers are also noticing it, and both taking action against it as well as trying to steal the pie (pre-mined coins, non-mineable coins, futures, etc).

Now is also the time where the underlying USE of each crypto will start to be assessed.  Sure your token and algorithm and white paper are cute, but what is the purpose of the tech?  The ones that are scams or useless will start to melt away, and the ones that show promise will continue to be adopted.

Since I started to research these "cryptocurrencies" I have realized that there are a TON of people involved with this technology. It reminds me of the early-mid 90's with the internet.  Now is when people are hashing out (sorry) whether a crypto will be useful in day to day life.  The tech certainly can be. Distributed ledgers are a great way for control to be decentralized.  It really can be revolutionary.  We just have to endure the smackdown by governments and the influx of snake oil charlatans.  I think that it will endure, and I am putting my $$ in to help.

pods

In reply to by wisehiney

pods HRClinton Tue, 01/16/2018 - 11:21 Permalink

I should be up and running by the weekend. Hopefully this retraction takes a bit of pressure off of this space and some stock will finally show up for parts.  Third party sellers want your first born for anything decent.  Nvidia, AMD  and the card manufacturers could make a killing by boosting production but they seem to be oblivious to the needs of miners.  I would say miners represent a large and growing % of their consumer base, as one miner can replace 6-100's of gamers.  Yet stocks seem to always be depleted.  Ramping up production takes time, but this current drought of cards is an instant replay of last summer.  It's frustrating.

pods

In reply to by HRClinton

qr259100 Four Star Tue, 01/16/2018 - 08:55 Permalink

Bit coin is so revolutionary it is stunning that it is even being allowed to occur. The value of having a currency not manipulated by governments and banks in the people’s hands is hard to imagine. But there are flaws in this system of currency that will cause problems.  The block chain is going to eventually be too large to handle and it does not actually fulfill all the requirements of a currency. Further it should be completely anonymous and it is not.

It seems that a door has opened that will allow for a digital currency to replace government created (and manipulated) fiat currency as long as it fulfills all the requirements of an actual currency and that people embrace it quick enough before governments try and knee cap it with their propaganda machines. An economy not being played like a puppet by banks and politicians would be a very different economy.

Check out CloudCoin and see it fulfills the requirements for a real digital currency. I think it does but it isn’t proven yet. I’d like to see some hackers go after it. I’d like to see it get its ass kicked all over town. I’d like to see if it can be a true replacement for government controlled currency.

For a full analysis of the differences between Bitcoin and CloudCoin and the flaws of the block chain check this site out.

https://cloudcoinconsortium.com/index.html

Get a free book called “Beyond Bit Coin” and 5 free coins here.

http://digitalfrontiernews.com/?affiliates=25

In reply to by Four Star

zebra77a Four Star Tue, 01/16/2018 - 13:17 Permalink

All user data is already being turned over from 2015 from any major exchange located in the United States. That's *why* there still in business at all. 

Coinbase Ordered to Turn Over Identities of 14,355 Cryptocurrency Traders to the IRS

https://motherboard.vice.com/en_us/article/ywnmkk/coinbase-irs-14000-bi…

The issue is not the end users, the real issue is the exchanges.  In order for a crypto-trader to 'Sell Bitcoin, and Buy Monero' they are completely different technologies, they don't talk directly.  All exchanges had to put virtual accounts in the middle.  As soon as they were able to do that your 'crypto' has been 'de-chained' off the blockchain and now trades in the virtual space of the Exchange.  That allows them to create fake and bake accounts and fake and bake pools of liquidity to trade against you.  They are 100% unregulated, and can do WHATEVER they want.  So they game the crap out of the exchange. You are not trading other traders you are now trading the house, just like the rest of them. If too many people withdraw their crypto (re-chain it to the blockchain) the public might realize then that the 'circulating crypto' inside an exchange is 5x the actual 'withdrawal balance crypto'  they can just 'blame a hacker' shutdown the exchange and keep the whole works, like Mt. Gox and many others have done.

In other words the exchanges can fiat the crypto as long as there is no 'crypto-run' on their exchange where the withdrawals are too large.

Once crypto is fully regulated It'll probably be completely synced to the DOW like everything else...

 

 

In reply to by Four Star

aardvarkk maxblockm Tue, 01/16/2018 - 11:28 Permalink

If it goes down 92% from the all time high, I might buy back in.  I got tired of the nerve factor...I'm not really cut out to have a lot of money sitting in something that could drop that much.  As it is, after I got out last week entirely, I realized about a 250% profit.  It's going to take quite a scenario for me to break out my hardware wallet again...and I won't put as much into it if I do it again.  That was a crazy ride...but for now at least it's done for me.  I suspect McAffee is full of shit.  We will see.

In reply to by maxblockm

aardvarkk GodSpeed_00 Tue, 01/16/2018 - 12:11 Permalink

I'm a software developer.  I've read the white paper and even looked at some of the source code.  The tech seems sound.  I just have a hard time equating "believing in the tech" with actually owning bitcoin or any particular coin.  I believe that hot air balloons work and are a thing, but that doesn't mean I think there is a huge demand for them or that I want to go up in one.  A plane is faster and safer.  In the case of bitcoin, structurally it will never be fast enough for a general application as an everyday payment system.  It CAN'T, given current tech.  Other coins seem to be better, but there are none yet that I've seen that would be able to handle the load demanded of a general, decentralized payment system that you would use to, say, buy your gas or groceries every day.  Too much network traffic and processing required.

Then there is the "Intel problem".  Everybody was sure that the chips our computers run on were bulletproof...except it turns out they weren't.  What if something like that happens with one or more cryptos?  It seems solid so far, but I wouldn't bet on it staying like that forever.  Especially if quantum computers become an actual, practical thing.  Then all bets are off in crypto as well as anything else that depends on things being limited by computing power.  All the remaining bitcoins could be mined by a single machine probably in an afternoon under that scenario.  And they're working hard on it.

In reply to by GodSpeed_00

Mustafa Kemal eclectic syncretist Tue, 01/16/2018 - 07:53 Permalink

"Is my oldbugs kicking in or were there a hell of a lot of people on here not so long ago saying that cryptocurrencies are beyond the reach of government control?"

Indeed, no government can "control" it, but that doesnt mean that the battle is not on.  It is on and it has begun in a big way.   What does your experience say about how blockchain technology adapts to government intervention, while russian miners are buying up power stations to mine it?

In reply to by eclectic syncretist

FakeNewsBandit tmosley Tue, 01/16/2018 - 09:00 Permalink

Exactly right. In a way, if they do crackdown on exchanges they will be doing us a favour in the long term. Decentralised exchanges are the future but it seems we might need a kick to get there. People are too lazy to change and too trusting of consistently shit exchanges like coinbase, bittrex etc. 

Ban em all for I care, the DEX's are ready to go

In reply to by tmosley