in bear market territory
Bitcoin is down about 30% over the past two weeks
Precipitous declines in prices for bitcoin and Ether in the wake of a potential crackdown on exchanges by Chinese authorities have shaved nearly $40 billion off the combined market capitalization of the cryptocurrencies over the past two weeks. The price of a single bitcoin BTCUSD, -11.25% tumbled nearly 8% on Thursday to $3,565, and has fallen nine of the last 13 days. Unlike stocks and bonds, bitcoin trades every day without a set closing time.
Bitcoin is now down nearly 30% from its peak at above $5,000 on September 1. This is a second drop of this magnitude in less than three months. Between June and mid-July, bitcoin prices fell 33%, largely due to fears surrounding the eventual upgrade of bitcoin’s software code and branching out of the Bitcoin Cash. Still, bitcoin is up about 250% since the start of the year with a market cap of $59.3 billion.
The most recent bout of selling of bitcoin began when China’s regulators declared so-called initial coin offerings illegal, dealing a blow to all digital currencies. The selloff accelerated on Tuesday, after J.P. Morgan Chase CEO Jamie Dimon called the cryptocurrency a fraud that was “worse than the tulip bulbs” and that “won’t end well”. Meanwhile, BTCC, a bitcoin exchange, said its China-based exchange will end all operations on Sept. 30 following unverified reports that Chinese authorities are preparing to ban cryptocurrency exchanges.
Prices of Ether, a blockchain currency that trades on the Etherium platform, plunged 13% to $240 and is down nearly 40% from its peak at $393 on Sept. 1. Ether’s market cap is at $23.5 billion. Ehter prices appreciated at a much faster rate this year, with the digital currency still up 3,000% since the end of last year. Acceptance of digital currencies varies from country to country. While many developed countries in the West and Asia allow digital currencies to be accepted as payments and have rules about taxation of gains, some emerging countries view them as an illegal form of payment.
Namibia’s central bank recently issued a paper outlining its unfavorable view of cryptocurrencies. The bank said under national laws merchants in the country cannot accept digital currencies as payment for goods and services, while cryptocurrency exchanges were also not allowed. Some experts think the wider acceptance and government approval is not as certain as bitcoin investors expect. “The current pricing assumes massive adoption, and I don’t think governments will allow the amount of adoption that’s currently priced in,” said Mohamed El-Erian, chief economic adviser at Allianz Global Investors, on CNBC Wednesday morning.